ISLA: Regulation has been the driving force
04 October 2018 London
Image: Shutterstock
鈥淩egulation has been the driving force [in the industry], with a significant amount of refiguring鈥�, said one panellist at this year鈥檚 International Securities Lending Association (ISLA) post-trade conference, in a panel discussing business drivers.
With many in the industry discussing the upcoming SFTR regulation, one panellist viewed regulation as a driver for opportunity and innovation going forward.
鈥淲e do have securities lending growing in importance and relevance,鈥� the panellist argued, 鈥渂ut it has never been as relevant as it is today.鈥�
Discussing key areas of focus in the industry, specifically, pledge, the panellist added: 鈥淥ne of the key areas of focus is the continued push for the balance sheet. Pledge has been at the top of our list in terms of it putting structure into place. It is also important because it is leveraging existing market infrastructures.鈥�
鈥淚n my opinion, it makes it slightly quicker to market, it is also a dual-sided benefit, which makes it more attractive to borrowers鈥攖here is a premium in the transaction.鈥�
Another panellist added: 鈥淭here is certainly a trading opportunity with pledge.鈥�
However, another panellist argued: 鈥淔or me, the focus is not just pledge, central counterparties (CCP) is another outlook in addition to pledge.鈥�
Discussing other key focuses in the market, one speaker noted that there is a lot of transparency in the current market and substantial competition between the prime brokers.
The panel also discussed Brexit, with one speaker outlining that the 鈥渕ain focus in regards to Brexit is positioning ourselves in terms of legal agreements. Regarding SFTR, I feel confident that there is not going to be too much of an issue or change there鈥�.
The panellists were then asked if there are elements that can help with the changing service provisions.
In response, a speaker said: 鈥淲e are trying to get those barriers down with a focus on balance sheet and by facing other counterparts, and with agility, you can look at beneficial tools. All of these things have a part to play in the market.鈥�
One member of the audience asked the panel: 鈥淚s lack of liquidity still the case when liquidity crunches come (regarding HQLA鈥檚), and are you hearing your counterparties bring that up?
One panellist replied 鈥淲e saw scarcity on liquidity around 2016 since then national central banks have become more sophisticated. I don鈥檛 think currently there is any liquidity shortages - nothing outside the normal market practice.鈥�
With many in the industry discussing the upcoming SFTR regulation, one panellist viewed regulation as a driver for opportunity and innovation going forward.
鈥淲e do have securities lending growing in importance and relevance,鈥� the panellist argued, 鈥渂ut it has never been as relevant as it is today.鈥�
Discussing key areas of focus in the industry, specifically, pledge, the panellist added: 鈥淥ne of the key areas of focus is the continued push for the balance sheet. Pledge has been at the top of our list in terms of it putting structure into place. It is also important because it is leveraging existing market infrastructures.鈥�
鈥淚n my opinion, it makes it slightly quicker to market, it is also a dual-sided benefit, which makes it more attractive to borrowers鈥攖here is a premium in the transaction.鈥�
Another panellist added: 鈥淭here is certainly a trading opportunity with pledge.鈥�
However, another panellist argued: 鈥淔or me, the focus is not just pledge, central counterparties (CCP) is another outlook in addition to pledge.鈥�
Discussing other key focuses in the market, one speaker noted that there is a lot of transparency in the current market and substantial competition between the prime brokers.
The panel also discussed Brexit, with one speaker outlining that the 鈥渕ain focus in regards to Brexit is positioning ourselves in terms of legal agreements. Regarding SFTR, I feel confident that there is not going to be too much of an issue or change there鈥�.
The panellists were then asked if there are elements that can help with the changing service provisions.
In response, a speaker said: 鈥淲e are trying to get those barriers down with a focus on balance sheet and by facing other counterparts, and with agility, you can look at beneficial tools. All of these things have a part to play in the market.鈥�
One member of the audience asked the panel: 鈥淚s lack of liquidity still the case when liquidity crunches come (regarding HQLA鈥檚), and are you hearing your counterparties bring that up?
One panellist replied 鈥淲e saw scarcity on liquidity around 2016 since then national central banks have become more sophisticated. I don鈥檛 think currently there is any liquidity shortages - nothing outside the normal market practice.鈥�
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