Reflections of the CEO

SFTR | CDM | Digitalisation

The past two weeks have once again centred considerably around our regulatory implementation initiatives, as well as thinking more broadly about where the market is heading into the rest of 2019 and then 2020.

Not unexpectantly, SFTR has been a focus and I would like to use this opportunity to highlight a couple of significant steps or milestones in the past few days. Together with our friends at ICMA and AFME, we are the principal custodians of the market led initiatives to deliver SFTR.  As part of that central role, we have been actively socialising progress and reviewing issues with a broader community where SFTR although important, is a lesser part of their focus.

Earlier this week, we hosted the first in a series of SFTR trade association meetings to share our SFTR experiences.  Further to that and as part of this outreach programme, we also delivered an SFTR update to the German Fund Association’s (BVI) committee group. Here again, our role is to both inform and educate around this important initiative whilst trying to put SFTR into better context.

In thinking about the general aims and objectives of a reporting regime such as SFTR, the role of the primary regulator is key to the delivery of the required outputs from the market in a timely and efficient way. This week saw another detailed session with senior officials from ESMA, as we work towards consensus on a number of important issues. As an aggregator and filter for market questions and issues, ISLA is providing a single and consistent conduit between ESMA and the market, whilst facilitating a better more transparent framework.

As an association, we have invested heavily in both people and systems to support the industry through the compliance with SFTR, and some of that investment is beginning to bear fruit.

On Monday, I was delighted to meet with Scott O’Malia and Peter Werner from ISDA. It was encouraging that we have similar views on a number of important issues that will shape financial markets over the coming years. In particular, the Common Domain Model (CDM) concept and the role of Digitalisation more broadly are areas where we know ISDA have done a lot of work and this clearly has implications for our markets.

Both CDM’s and Digitalisation feature prominently as part of the technology focus at our flagship conference in Madrid this June. We are developing a strong agenda over the three days, and this week saw the announcement of Steven Maijoor, the Chair of ESMA to provide the opening keynote address. I am personally delighted that Steven will be able to join us, as his insights into our markets are always thoughtful and well-balanced.

Finally, we saw the publication of the 10th edition of the ISLA Securities Lending Market Report. In this latest report. we see an industry that is still expanding but looking for ways to minimise costs, optimise the use of collateral and looking to unlock new sources of supply. Here, the imminent arrival of additional collateral requirements for uncleared derivatives in 2020 will have a direct impact on our market, and it is important that we think about how we want to deal with the inevitable increase in the demand to borrow securities, particularly HQLA. As ever the full report is available to download via our website

Andrew Dyson, CEO

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