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      Dear Reader,                                and sponsorship tell us anything about the industry,   the governance requirements that are enshrined within   work to create a workable CDM framework, has only been
                                                  then the high level of delegate registrations and record   this ethos. This demands that institutional investors   driven by the regulatory imperative of SFTR. It is therefore
      We are once again delighted to welcome you to the latest   levels of sponsorship suggest that the industry is in rude   have a policy around their governance as well as their   vitally important in our view, that the industry does not
      edition  of  the  ISLA  Securities  Lending  Market  Report.   health. However, the picture is probably not that clear cut.   securities lending programmes.  miss this once-in-a-lifetime opportunity to drive change
      This is now the 11th edition of the report, which continues   Anecdotal feedback at the conference combined with                               and reap the real benefits that SFTR could bring to us all.
      to provide a platform for us all to better understand the   recently published profitability and revenue figures for the   Set against a backdrop of tightening revenues and
      forces that are shaping our markets today, and the   first six months of 2019, suggest revenues from securities   the challenges presented by an increasingly complex   We would like to take the opportunity of this Foreword
      implications for market participants and other interested   lending  are  down  on  levels  seen  in  2018.  Statistics   regulatory and business environment, the market has to   to thank those who have contributed thought leadership
      stakeholders alike.                         recently published by IHS Markit highlight a 15% fall in   think more broadly about how it can use the structural   pieces,  each  providing  a  unique  perspective  on  an
                                                  revenues for the first six months of the year, compared to   rigor created by SFTR and CSDR to leverage real   important topic. The first of our three guest contributions
      Since we published the last edition of the report in early   the same period in 2018. The most pronounced falls were   business  benefits  from  these  changes.  Inevitably,  the   comes from Tadawul, who considers the development of
      2019, we have seen something of a change of pace   seen in respect of government bond lending, which fell   market like many others is turning to technology to help   the capital markets in Saudi Arabia. We should not forget
      around several key legislative and business development   some 24% during the first half of the year. We will explore   solve these challenges.   that that the Middle East and Saudi Arabia in particular are
      initiatives that we for one are focused on here at ISLA.   some of the reasons behind the apparent fee spread                                  growing in prominence, and that the role that securities
      Whilst we will discuss SFTR a little later, it is important   compression in government bond markets later on in this   Today, we are seeing real momentum behind the   lending has to play in supporting market liquidity and
      to recognise that the publication on 11 April 2019 of   report, however it would appear that there was a fall-off in   development of Common Domain Models (CDMs)   facilitating investor access to these markets is key.
      the Regulatory Technical Standards (RTS) for SFTR in   the demand to borrow High Quality Liquid Assets (HQLA),   and  digital  contracts,  as  firms  look  to  standardise
      the  European  Union’s  Official  Journal  (OJ),  set  out  a   just as the European Central Bank’s (ECB)’s Quantitative   technology platforms and create cross-product efficient   Next, Credit Benchmark looks at the role of ratings in
      clear implementation timeline for SFTR until Q2 2020   Easing (QE) stimulus program came to an end.  documentation  conduits.  Increasingly,  it  makes  sense   the context of better managing and understanding
      when the first reports are now due to be submitted. The                                            for firms and markets to standardise taxonomy for the   counterparty credit risk.
      publication of the RTS in the OJ has created certainty   Another factor that was discussed extensively in Madrid,   various data points and component parts of a trade. This
      where uncertainty existed up until now and has provided   was  the  role  of  sustainable  finance  and  ESG  in  the   should be done on a consistent and cross market basis,   Our final piece has been produced by MarketAxess on
      a focal point for much of the industry over the coming six   context of changing investor behavior more broadly and   especially where those terms and life cycle events are   SFTR, who explain why the industry needs to learn from
      to twelve months.                           what this means for our markets. It was commented      common to a number of markets and products. In terms   past implementations of regulatory reporting, and start
                                                  by one of our panellists that Environmental, Social and   of the appropriate owner or custodian of any CDM for our   making earlier preparations for compliance.
      Before we look at the further implications of what SFTR   Governance (ESG) screening is now an integral part of   markets, we would as you might expect, argue that this is
      means for our industry, it is worth reflecting on some of   the investment management decision making process,   something that should be held by a neutral third party for   As always, we would like to thank our data partners;
      the other trends that have shaped our thinking in the   and  this  has  clear  ramifications  for  our  markets.  As   the benefit of all industry participants. Consequently, ISLA   IHS Markit, DataLend, FIS Global, JP Morgan Tri-party,
      first six months of this year. Looking back to our annual   so-called millennials demand different things and new   is investing time and resources to better understand how   Euroclear, BNY Mellon Tri-Party, and Clearstream for their
      conference  in  Madrid  during  June,  we  saw  several   criteria to judge ‘return’, securities lending must respond   these technologies and frameworks can be developed   valued data inputs.
      consistent themes and broader messages that paint an   to  these  changing  dynamics.  ESG  driven  funds  can   for the benefit of the broader community. We have to be
      interesting picture of our markets today. If attendance   present challenges around collateral acceptability and   honest with ourselves and acknowledge that much of the      ISLA Team

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