Unrest is growing among market participants as an appeal remains unsuccessful to postpone rules for mandatory buy-in under the settlement discipline regime of the EU Central Securities Depositories Regulation. The European Commission, the European Council and the European Parliament reportedly have met to discuss postponement but have made no progress, so a February implementation date remains in place. The European Commission is working on a legislative proposal this week, says Ugo Bassi, directorate-general for financial stability, financial services and capital markets union.
Panellists at a conference have criticised rules for mandatory buy-in under the EU Central Securities Depositories Regulation as inappropriate for the settlement process and as a risk to objectives of the capital markets union. "If the January proposal is going to change the rules, there's no point in implementing a flawed set of rules and subsequently changing them," says James Cunningham, head of European regulatory and market initiatives at BNY Mellon. "There is a big question surrounding their significant impact on the market as a whole."
The Federal Reserve Bank of New York's Open Market Trading Desk is testing small-value contingency securities lending. The test checks operational readiness and the ability to implement existing and possible policy directives from the Federal Open Market Committee, and results are posted thereafter on the New York Fed's website.
State Street has executed the first trade on its buy-side peer-to-peer repo platform, conducting a trade between a large asset owner and an investment manager. "This is an exciting milestone for the global markets funding and collateral team, and we look forward to continuing to partner with our clients to advance the tools they need to more seamlessly manage their financing, collateral management, securities lending and digital opportunities," says Leslie Womack, head of product development for global markets funding and collateral.
Securities finance automation specialist Pirum has enhanced the Collateral Connect service with a facility to help clients meet collateral reporting obligations under Europe's revised Markets in Financial Instruments Directive. The facility enables reporting in whatever format and frequency are required by a regulator.
A significant step forward in setting consistent standards to evaluate environment, social and governance-related products is expected with next month's launch of the International Sustainability Standards Board, which will set standardised ESG reporting metrics. However, numerous questions remain about how to make accurate, comparative evaluations so investors may determine the impact of their investment.
The financial-services sector is poised to play a key role in how the world tackles climate change, and industry veteran Simon Puleston Jones explains how the UN Climate Change Conference of the Parties might influence the flow of capital aimed at the issue. Puleston Jones, co-founder and CEO of Climate Solutions, also details crucial steps policymakers can take at COP26 and outlines the educational journey taking place regarding environmental, social and governance factors and impact investing.
Digital assets will change the way custody services operate but could lead to market fragmentation, panellists have said at a conference. "Once you start to see the [distributed-ledger technology]-based markets issuing fully digitised assets from issuance through to trading and settlement, you can realise a lot of efficiencies both in trading and settlement, as well as the post-trade/asset servicing," says Nadine Teychenne, director and head of digital assets for securities services at Citigroup.
A group of institutions, led by Euroclear, has tested use of a central bank digital currency and blockchain technology for a French treasury bond settlement, which the group says was successful. A research paper describing the experiment highlights potential benefits of using a blockchain platform, particularly for cross-border settlement, including easier workflows, better transparency and faster processing times, which could aid the transition to a T+1 settlement cycle.
UK fintech SETL is open-sourcing platform PORTL to facilitate adoption of distributed-ledger technology in financial services. "The potential of DLT solutions is still significantly underexploited," SETL CEO Philippe Morel says. "With our open-source and fully interoperable PORTL framework, we hope to contribute to a wider adoption of DLT-based solutions."
A committee working on a T+1 settlement cycle aims to issue an executive summary on the move to T+1 from T+2 in coming weeks, says Robert Cavallo, director of clearance and settlement product management at Depository Trust & Clearing Corp. The summary includes a timeline for T+1 introduction, and Cavallo says the fourth quarter of 2023 or Q1 of 2024 "would be ideal for go-live".
The shift to remote work during the pandemic has forced the post-trade industry to modernise technologies and to update systems, executives have said at a conference. The market has adapted well, says Oliver Wyman partner Archie Stebbings, who notes significant improvements and "a number of adoptive technologies that have been streamlined".
The European Central Bank is pushing banks to increase staffing and capital levels for post-Brexit operations in the EU, sources say. A predicted exodus of jobs from London to the Continent after the UK left the bloc has failed to materialise, but industry sources say the ECB is becoming increasingly firm in demanding banks move resources to the Continent to manage operations there.
In the lead-up to COP26, and to support the upcoming ISLA-led panel at the World Pensions Council's G20 Pensions Dialogue & ESG Forum, ISLA is pleased to announce the publication of "Framing securities lending for the sustainability era" in French. The white paper produced jointly by ISLA and Allen & Overy looks at the role of lending in the transition to a sustainable economy and how ISLA is supporting that process.
We struggle to climb, or we struggle to fall. The thing is to discover which way we're going.
Daphne du Maurier, writer
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About the International Securities Lending Association (ISLA)
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