Reflections of the CEO

The Year Ahead

Inevitably, the first month of the year is always an opportunity to think about what the coming year may bring. To an extent there is a feeling of renewal as the days begin to lengthen, and notwithstanding the continued overhang of the pandemic, that desire to look forward is stronger than ever. Therefore, in this opening blog of 2022, I wanted to outline some of the Association’s key priorities for the year as well as touch upon some of the major themes that I believe will shape our industry over the coming twelve months.

Before I begin however, I want to take a moment just to reflect upon our recent history and an event that I feel effectively changed our markets forever, including the role of ISLA within the industry.

The arrival of SFTR in 2015 still resonates very strongly today, as we look at the recent SEC 10c-1 proposals for the reporting of securities lending transactions in North America. Prior to SFTR, most regulations touched upon securities lending as a by-product of other regulatory regimes, such as MiFID and short selling. The scope and frequency of SFTR reporting was of a magnitude greater than anything we had ever seen before, and it was obvious almost from the offset that this could only be achieved if there was extensive collaboration across our markets. The challenges around SFTR were compounded by the requirement for the market to report on a dual-sided basis against several critical matching fields. Whilst SFTR is now up and running across Europe, its legacy in terms of how it pushed us towards a standardised view of the world, is still very much with us.

That work on defining trade and life cycle data standards led directly to our exploration of the Common Domain Model (CDM) as well as the Clause Library & Taxonomy initiative. Whilst there is no doubt that delivering SFTR across our industry was one of the biggest data challenges that many of us will face, the investment in better understanding how our markets function means that we are now able to contemplate greater integration of digital technologies that will drive further efficiencies over time.

So what does all of this mean for 2022?

To an extent, ISLA today runs two distinct businesses. The first provides traditional regulatory and advocacy-driven focus to our activities. Here, most of you will be familiar with members of the Regulatory & Market Practice team that are actively engaged in covering consultations, as well as developing clear positions on key topics such as sustainability and new markets. In the first quarter of this year alone, we expect to respond to up to eighteen regulatory consultations on behalf of our members. Much of our broader advocacy work will continue with our efforts to align securities lending with the wider sustainability agenda, including further work in the first half of 2022 to socialise our ideas with relevant stakeholders, such as the UN PRI and various investment management flag associations.

One of the lessons that we have learnt from the developing ESG agenda, is that many of the challenges that our members are facing are truly global in their nature, and that they are looking in our direction to provide guidance and support. In response to that very clear message, we were delighted to be one of the founding members of the Global Association of Securities Lending Associations (GASLA) in the latter part of last year. GASLA will feature heavily in our work this year, not just in the context of sustainability, but across our respective regional markets in areas where we feel a single common voice on strategic issues will benefit our collective memberships and the wider stakeholder community.

SFTR has also not exactly gone away either, as we do expect an SFTR review to commence later on in the year. In the near term, the commencement of settlement failure penalties under CSDR in February, will undoubtedly occupy much of our time into the spring. As mentioned, SFTR has very much changed the way we think about data more broadly. Similarly, CSDR has forced us to rethink settlement. The immediate output from much of our work has been in the development of best practice, allowing our members to align post trade operational procedures to minimise the prevalence of fines and define obligations and responsibilities across the settlement chain.

Best practice may also be regarded as something of a bridge between the day-to-day business of the Association, and the more forward-looking digital world that very much sits alongside. One of the by- products of the global pandemic has been the clear acceleration of the wider digital agenda. You only have to consider the rise of video conferencing providers and technologies, or the installation of fibre optic broad band cables across the UK to accommodate our virtual demands. That direction of travel has been set more broadly for some time, but the speed of that change has increased as the way we see the workplace has evolved and we move to flexible working arrangements.

Financial markets and securities lending cannot be immune to this huge shift in focus and sentiment. We have been investing in the digital agenda for some time, and in 2021 we delivered a minimal viable securities lending product within the CDM, together with our legal Clause Library. There is much more to come from both areas in 2022, where you will begin to see the deployment of our digital frameworks on some of our most pressing issues. In particular, I would highlight some of the work that we plan to do on both Agent Lender Disclosure (ALD), and managing collateral within an ESG framework.  Both cannot really be effectively addressed without thinking about them from a different perspective; developing new and novel solutions around the CDM will give us that opportunity.

In closing, I would also highlight the work that our Events, Marketing & Communications team are doing to deliver our content and messaging. Yesterday, we held the first in a series of monthly topic-specific webinars, beginning with a focus on the political and regulatory landscape for the year ahead. These updates and discussions will complement the work of our various working groups, alongside our periodical podcasts. Finally, we are working very hard to deliver our first hybrid event in the summer, as we look to return to Vienna. Further details on ISLA events and our forthcoming webinars to follow in due course.

Andrew Dyson, CEO

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