“Vote for your right...or your left"
With 2023 firmly behind us, all eyes are looking ahead to 2024, dubbed ‘the year the world goes to vote’. Against this backdrop, I’m sure the year will bring many twists and turns, and whether we like it or not, the securities finance world is along for the ride.
Geopolitical and Economic Uncertainty
2024 will see more than 60 countries, representing over half the world’s population, hold regional, legislative, and presidential elections, which will no doubt shake up the political and economic landscape like never before. While many political commentators are betting on a test for democracy and a further rise of populist ideologies, at ISLA, our focus will be on staying ahead of the potential regulatory and legislative fall out of these elections and what they could mean for the securities finance ecosystem.
In collaboration with a number of partners, we are closely following the outcomes of both the EU and UK elections to identify opportunities to influence, educate and communicate to those who will drive policy, regulation, and legislation, ensuring we position our markets in the proper context.
Regulation – From Implementation to Impact
Irrespective of the geo-political and economic outlook, what is certain is that securities finance is in for another year of contrasts, not least from a regulatory perspective. Much has already been written about ongoing regulatory pressures, namely Basel III and T+1, which will continue to shape the dialogue as firms start to implement the various reporting, monitoring, and management protocols within their businesses.
While much of the focus in 2024 will be on the continued implementation of Basel III and T+1 requirements across agent lenders and borrowers, 2024 will also see the lens widen to look what these developments mean for the protagonists at either end of the value chain.
Uncertainty remains as to whether tighter capital restrictions and increased settlement costs will lead to an increase in trade costs thereby effectively slowing the flow of securities and ultimately decreasing liquidity. On the flip side however, we could see an increase in competitiveness within the chain resulting in more efficient trades, lower costs, and higher levels of liquidity. ISLA will work with its members to ensure it is the latter.
Technology – Fragmentation to Consolidation?
It is not surprising that against this backdrop, 2024 will likely see many new technologies and platforms come to market to help simplify, standardise, and alleviate some of the regulatory burden which is inherent across the securities finance trade lifecycle. The space will become more competitive as new players enter the market with innovative, cost effective and scalable solutions across the pre and post trade space.
While an increase of solutions comes with promise of lower costs and greater efficiency, so does inherent risk through greater fragmentation, less standardisation and computability challenges.
Our RegTech team continues to make strides in driving the adoption of common standards and best practices including the Common Domain Model (CDM), and I expect to see further integration of the CDM in a number of platforms throughout the year. ISLA, in association with ICMA and ISDA will be hosting the second CDM Showcase event in February to deep dive into current developments and share real life use cases of the CDM in practice. Please contact the team if you would like to learn more.
Closer to Home
At ISLA, our priority for the year is to continue to add value to our ever growing, and ever more internationally focussed membership. This means continuing to drive advocacy on the most pertinent issues, leveraging our market knowledge to publish timely thought leadership and growing our networks through market leading events. In response to the evolving needs of our members, we are also working to further expand our product and geographical footprint in 2024, including the continued focus on the Middle East.
To support these ambitions, we are continuing to expand our team, and I’m pleased to announce that Alistair Griffiths has recently joined as Director – Business Development. Alistair will work with internal stakeholders to strengthen our relationship with current member firms, develop services and strategic partnerships to enhance ISLA’s membership offering, and identify new growth opportunities across the securities finance landscape and associated & adjacent markets.
Looking further ahead, plans are well underway for our Annual Conference which will be held in Geneva this June and will once again bring together those from across the global industry to focus on themes such as market best practice, regulatory developments, while also deep diving into overarching topics such as Digitalisation, Sustainability and Diversity Equity & Inclusion . A detailed agenda will be published in due course with registration opening on 23 January.
On the topic of DEI, there is no denying that a more diverse industry will bring about more diverse thinking and solutions to the challenges we face. Part of the solution is providing a clear growth path for new entrants to the sector. To this end, we launched our ISLA Connects brand in May 2023. Through ISLA Connects and associated events and initiatives, we aim to create an inclusive and collaborative industry that encourages positive change, helping to foster an atmosphere of understanding, respect, and collaboration in the securities finance market while also supporting the development of newer entrants to the sector. Next week, and in association with Citi, we will be holding our first educational briefing on Basel, followed by structured networking. For those who have registered to attend, we are very much looking forward to meeting many of you for the first time.
I want to thank our members for their continued support through 2024, I hope our members can build on the successes of 2023. Please do get in contact with the team should you require information about any of the above.