Forever adapting
03 May 2018
The 网爆吃瓜 Financing Transaction Regulation, data and blockchain were all hot topics at the first 网爆吃瓜 Finance Technology Symposium in London
Image: Shutterstock
网爆吃瓜 Lending Times hosted the first of its kind 网爆吃瓜 Finance Technology Symposium, welcoming over 200 delegates to the Grange Hotel St Paul鈥檚 to discuss current market issues, how technology can help, what solutions are available and the future direction of the market.
网爆吃瓜 finance is an essential part of financial markets. Much has changed in the ten years since the global financial crisis, which cast a negative spotlight on securities finance and brought the phrase 鈥榮hadow banking鈥� to the forefront of regulator鈥檚 minds.
The event provided the industry a chance to consider how technology can assist in every step in the life cycle of a trade, making it a central topic for everyone going forward.
Some of the big talking points of the day included data, which come as no surprise since most, if not every, topic revolves around data.
Meanwhile, no securities finance conference would be complete during this climate without a discussion around the 网爆吃瓜 Financing Transactions Regulation (SFTR). Blockchain also featured in the discussion of various panels, even if it did receive a mixed reception.
Andy Dyson, CEO of the International 网爆吃瓜 Lending Association (ISLA) kicked off the first panel 鈥楧ata鈥擳he fuel for Automation鈥�.
Dyson, who moderated a panel including Pierre Khemdoudi of IHS Markit, James Palmer of DataLend and David Lewis of FIS 网爆吃瓜 Finance, discussed how the world of data is becoming more complex and demanding with the rise of automation and the introduction of new regulation, such as SFTR.
It was also revealed that a substantial increase of data transactions, 31 percent over the last three years, has led to an increase in demand.
One panellist said: 鈥淭he securities finance industry and the quantity of transactions are enormous. It is getting broader, faster, deeper and more valuable. People are building up this data to become the best.鈥�
He noted that the expansion of data itself and the way in which people consume that data has changed, adding that data is not new it鈥檚 digitalisation and the volume of it that has changed.
Another suggested that data also has a major impact on automation, while another explained that machines are consuming data, not people.
According to one panellist, who works at a technology provider, 90 percent of his company鈥檚 transactions are now untouched by the human hand.
Not only has the demand for data increased, but firms are now demanding specific parts of data and information instead of the whole data sheet.
It was suggested that the speed of technology is allowing firms in the industry to do thinking they couldn鈥檛 do before.
SFTR was also included in the discussion. Panellists explained that the introduction of the regulation would alter the securities finance landscape, as firms will have to do a 鈥渉uge amount of work around data鈥�.
A panellist noted: 鈥淲hat people are looking for now is not cost-benefit but return on investment. The thought process has changed.鈥�
Another panellist added that data sits at the heart of SFTR implementation, with the next few years revealing the most complex and detailed market regime ever seen in Europe.
On a separate panel, David Field of The Field Effect, Mark Byrne of EquiLend, Dean Bruyns of Broadridge, Adrian Dale of IHS Markit, John Kernan of Regis-TR and Steve Holland of the London Stock Exchange Group, talked about the concerns around data fields for SFTR compliance.
It was revealed that around 40 percent of fields are not readily available as it stands.
One panellist explained that customers are currently doing a gap analysis and are becoming worried about those fields.
However, there was some reassurance, one speaker said: 鈥淚 know the industry is working to establish those fields and that the International 网爆吃瓜 Lending Association is also doing a lot of work on that.鈥�
There was also a lot of discussion around the technology implications of SFTR. Panellists debated whether a buy or build solution is best for clients.
According to one of the speakers, it can depend on a number of factors, one being the amount of data fields the firm currently has in its system. He explained that people need to consider how data is going to be extracted, and if you do delegate there still needs to be a reporting solution in place.
One industry participant suggested that companies can use existing systems from other regulations such as European Market Infrastructure Regulation (EMIR), and the second Markets in Financial Instruments Directive (MiFID II).
The panel advised firms to 鈥渟pend wisely鈥� whether that be building on an existing system or buying into a new one.
He said: 鈥淵ou can overcome a lot of complexity if you鈥檙e careful with what you build and what you buy. Also, choosing the right company to deal with is critical to get right. There is an incentive to spend wisely.鈥�
The conference also featured a panel discussion focusing on collateral management and optimisation. Panellists, which included Jonathan Adams of Delta Capita, Martin Walker of Broadridge, Ted Allen of FIS 网爆吃瓜 Finance, Richard Gomm of Lombard Risk and Phil Morgan of Pirum Systems, agreed that regulation is driving change, especially in the collateral management space.
According to the panel, 鈥渨e [the industry] shouldn鈥檛 underestimate the regulatory change that is happening鈥�, citing the 2008 financial crisis as a major catalyst for that change.
It was suggested that a lot of firms are creating innovative services because of underlying drivers.
One speaker explained that there has been an increase in demand for cross-product systems.
He said: 鈥淭he behaviour has changed significantly in the last decade, in terms of the net result of reduction in financial resources鈥攖he sell side especially have to do more with less, regulatory adherence is a number one priority鈥攖he bottom line is cost.鈥�
Another added: 鈥淸The securities lending industry] have, I believe, now decided on the whole what their business model is.鈥� He also noted that the buy-side has, in recent times, been impacted by a wave of regulations, but in terms of asset requirements, he said 鈥渋t鈥檚 not just one particular area, several were impacted by the recent wave of regulations鈥�.
Although the industry has been severely affected by this level of regulation, there has been a lot more collaboration with vendors over the last few years, he explained.
Another panellist cited that from a securities lending perspective, there is a lack of investment in the over-the-counter environment. However, he noted that attitudes are changing because of regulations surrounding collateral and the need to reduce the cost is changing. He explained: 鈥淭here鈥檚 not a weakness in changing.鈥�
Collaboration, which has been a big topic of conversation in recent times, was also mentioned. It was suggested that if companies collaborate together, they are likely to become better solution providers, who cover all areas.
One speaker predicted an increase in companies investigating and exploring blockchain, while another said: 鈥淚鈥檓 sitting on the fence with blockchain, it could be over used as a solution looking for a problem.鈥�
There was also another prediction, suggesting that machine learning will also have a part to play in the future of collateral optimisation. The panellist explained that with an ever-changing regulatory environment you never know what might happen next.
During another panel, which featured Armeet Sandu of StoneWain, Boaz Yaari of Shargain, Matthew Harrison of Trading Apps and Tammy Phillips of SBL Network, distributed ledger technology (DLT) was also discussed.
It was agreed that in one way or another, DLT will help to transform the industry over the next three to five years.
According to the speakers, firms are trying to find their own way into such technologies.
However, one panellist explained that the industry should hold back until it becomes standardised in the industry.
He said: 鈥溚怨� lending can do a lot to innovate without using blockchain in the next three to five years.鈥�
Another panellist agreed with an earlier panellist, again suggesting that blockchain is a solution looking for a problem.
The speaker commented: 鈥淎s these technologies are rolled out, people will experiment with them to see how they can be used within the business.鈥�
However, another industry participant disagreed with the statement, suggesting that blockchain can be used to create something new in the industry鈥攐ne example included cost savings.
The panellist explained: 鈥淓verything we talk about is simplistic, transparent and secure, so why couldn鈥檛 blockchain help with that.鈥�
With regulatory changes, there will be more transparency, more automation and an increase in the reliance on technology firms. One panellist said that the winners in this new world would be the ones who develop platforms that slot easily into legacy systems and take advantage of what is already there.
The panellist said that his company, a technology provider, has spoken to many institutions and, 鈥渂y and large, their technology is terrible鈥�, while another added that technology companies are using cutting-edge technology, while participants are using legacy systems.
To adapt, changes will have to be made to these systems. It was noted that these are not small changes, but larger, wider reaching ones. A panellist said that the current market infrastructure has 鈥渂een there for decades鈥�.
One speaker was suprised at how the participants鈥� ability to evolve has been hampered in recent years, by regulation and other challenges. He commented: 鈥淪omething that used to take months can now take years.鈥�
鈥淭hey don鈥檛 have the ability to evolve fast enough. If you look at other industries鈥攅very bank is investing in technology鈥攊n other industries, people would say why are you investing in technology? Instead get it from a technology vendor.鈥�
鈥淭he current state of technology is not where it needs to be. It鈥檚 not going to get us to the market structures we want.鈥�
DLT also featured in the collateral liquidity platforms session. The panel, which included Bill Foley of SecFin Hub, David Raccat or WeMatch.网爆吃瓜Financing, Gabriele Frediani of Elixium and Guido Stroemer of HQLAx, suggested that DLT could be a solution to manage challenges around regulation.
It was suggested that DLT can help with implementing the latest regulatory changes, as well as offering great benefits to those involved in collateral trades.
One panellist explained that while DLT is often seen as overhyped and criticised for having solutions to problems that have yet to exist, it can be a useful tool in benefiting and working through new regulation.
For the regulatory community in the securities lending space, technology can provide a better overview on collateral change, while regulators can access to a network that lets them see more, according to one speaker.
However, there are still challenges to be had when building a new platform with new technology, and there are lots of boxes to tick.
During the post-trade panel, which included Dan Barnes of The Desk, Iain Mackay of EquiLend, James Hollands of DTCC, Rajen Sheth of Pirum Systems and David Morris of RegTek Solutions, it was suggested that firms must look to improve efficiency after implementing new regulatory measures.
The panel explained that following the implementation of regulatory initiatives, firms should look to take efficiency measures and make 鈥渉olistic鈥� changes to their operating models. One panellist said: 鈥淭he mantra, from a post-trade perspective, is that you need to do more with less鈥攈ow do you keep it efficient and get increased volume while using fewer resources?鈥�
Another panellist added: 鈥淭his is the kind of challenge that firms have to sit down and think about鈥攖he tactical issues, the more strategic benefits.鈥�
Panellists discussed how most firms have to keep their heads down and deal with regulatory deadlines to ensure compliance. Often, this doesn鈥檛 leave a lot of room to create efficient operating models.
The implementation of these regulations may impact operations as it is. One panellist said that he is very focused on the trade repositories (TRs) that are involved in regulatory implementation. He said that firms have to understand the requirements, what the fields represent and what they have to be.
The panellist added that, if firms don鈥檛 get it right, they could be seeing a fallout that will ultimately sit with the operating models. He said: 鈥淔irms should not be wasting any moment, because we only have about 12 months to get this right. If they do get it right, there will be great benefits.鈥�
The panellist concluded that having a dialogue with TRs is important. He explained: 鈥淭he dialect with trade repositories needs to be more obvious, we need to know exactly what they鈥檙e doing in terms of solutions already being discussed. Firms needs to understand what TRs are doing. They need to sit down, find out what these regulations mean and figure out a solution.鈥�
Finally, panellists said firm鈥檚 should not delay when implementing reporting requirements. They agreed that the industry should not delay, as there鈥檚 鈥渟o much to do鈥�.
鈥淪tart early, think strategically鈥�, said another panelist.
Dyson concluded the day with a few closing remarks. Referencing the discussions around SFTR, he said that SFTR casts a very long shadow over the industry, but it will not disappear so firms should think about how they will have to comply with it. He advised firms: 鈥淒on鈥檛 delay, the clock is ticking.鈥�
A special thank you to all the sponsors for supporting SLT鈥檚 first technology conference, and to all those who attended and made the day a great success. Be sure to look out for our next event in the near future.
网爆吃瓜 finance is an essential part of financial markets. Much has changed in the ten years since the global financial crisis, which cast a negative spotlight on securities finance and brought the phrase 鈥榮hadow banking鈥� to the forefront of regulator鈥檚 minds.
The event provided the industry a chance to consider how technology can assist in every step in the life cycle of a trade, making it a central topic for everyone going forward.
Some of the big talking points of the day included data, which come as no surprise since most, if not every, topic revolves around data.
Meanwhile, no securities finance conference would be complete during this climate without a discussion around the 网爆吃瓜 Financing Transactions Regulation (SFTR). Blockchain also featured in the discussion of various panels, even if it did receive a mixed reception.
Andy Dyson, CEO of the International 网爆吃瓜 Lending Association (ISLA) kicked off the first panel 鈥楧ata鈥擳he fuel for Automation鈥�.
Dyson, who moderated a panel including Pierre Khemdoudi of IHS Markit, James Palmer of DataLend and David Lewis of FIS 网爆吃瓜 Finance, discussed how the world of data is becoming more complex and demanding with the rise of automation and the introduction of new regulation, such as SFTR.
It was also revealed that a substantial increase of data transactions, 31 percent over the last three years, has led to an increase in demand.
One panellist said: 鈥淭he securities finance industry and the quantity of transactions are enormous. It is getting broader, faster, deeper and more valuable. People are building up this data to become the best.鈥�
He noted that the expansion of data itself and the way in which people consume that data has changed, adding that data is not new it鈥檚 digitalisation and the volume of it that has changed.
Another suggested that data also has a major impact on automation, while another explained that machines are consuming data, not people.
According to one panellist, who works at a technology provider, 90 percent of his company鈥檚 transactions are now untouched by the human hand.
Not only has the demand for data increased, but firms are now demanding specific parts of data and information instead of the whole data sheet.
It was suggested that the speed of technology is allowing firms in the industry to do thinking they couldn鈥檛 do before.
SFTR was also included in the discussion. Panellists explained that the introduction of the regulation would alter the securities finance landscape, as firms will have to do a 鈥渉uge amount of work around data鈥�.
A panellist noted: 鈥淲hat people are looking for now is not cost-benefit but return on investment. The thought process has changed.鈥�
Another panellist added that data sits at the heart of SFTR implementation, with the next few years revealing the most complex and detailed market regime ever seen in Europe.
On a separate panel, David Field of The Field Effect, Mark Byrne of EquiLend, Dean Bruyns of Broadridge, Adrian Dale of IHS Markit, John Kernan of Regis-TR and Steve Holland of the London Stock Exchange Group, talked about the concerns around data fields for SFTR compliance.
It was revealed that around 40 percent of fields are not readily available as it stands.
One panellist explained that customers are currently doing a gap analysis and are becoming worried about those fields.
However, there was some reassurance, one speaker said: 鈥淚 know the industry is working to establish those fields and that the International 网爆吃瓜 Lending Association is also doing a lot of work on that.鈥�
There was also a lot of discussion around the technology implications of SFTR. Panellists debated whether a buy or build solution is best for clients.
According to one of the speakers, it can depend on a number of factors, one being the amount of data fields the firm currently has in its system. He explained that people need to consider how data is going to be extracted, and if you do delegate there still needs to be a reporting solution in place.
One industry participant suggested that companies can use existing systems from other regulations such as European Market Infrastructure Regulation (EMIR), and the second Markets in Financial Instruments Directive (MiFID II).
The panel advised firms to 鈥渟pend wisely鈥� whether that be building on an existing system or buying into a new one.
He said: 鈥淵ou can overcome a lot of complexity if you鈥檙e careful with what you build and what you buy. Also, choosing the right company to deal with is critical to get right. There is an incentive to spend wisely.鈥�
The conference also featured a panel discussion focusing on collateral management and optimisation. Panellists, which included Jonathan Adams of Delta Capita, Martin Walker of Broadridge, Ted Allen of FIS 网爆吃瓜 Finance, Richard Gomm of Lombard Risk and Phil Morgan of Pirum Systems, agreed that regulation is driving change, especially in the collateral management space.
According to the panel, 鈥渨e [the industry] shouldn鈥檛 underestimate the regulatory change that is happening鈥�, citing the 2008 financial crisis as a major catalyst for that change.
It was suggested that a lot of firms are creating innovative services because of underlying drivers.
One speaker explained that there has been an increase in demand for cross-product systems.
He said: 鈥淭he behaviour has changed significantly in the last decade, in terms of the net result of reduction in financial resources鈥攖he sell side especially have to do more with less, regulatory adherence is a number one priority鈥攖he bottom line is cost.鈥�
Another added: 鈥淸The securities lending industry] have, I believe, now decided on the whole what their business model is.鈥� He also noted that the buy-side has, in recent times, been impacted by a wave of regulations, but in terms of asset requirements, he said 鈥渋t鈥檚 not just one particular area, several were impacted by the recent wave of regulations鈥�.
Although the industry has been severely affected by this level of regulation, there has been a lot more collaboration with vendors over the last few years, he explained.
Another panellist cited that from a securities lending perspective, there is a lack of investment in the over-the-counter environment. However, he noted that attitudes are changing because of regulations surrounding collateral and the need to reduce the cost is changing. He explained: 鈥淭here鈥檚 not a weakness in changing.鈥�
Collaboration, which has been a big topic of conversation in recent times, was also mentioned. It was suggested that if companies collaborate together, they are likely to become better solution providers, who cover all areas.
One speaker predicted an increase in companies investigating and exploring blockchain, while another said: 鈥淚鈥檓 sitting on the fence with blockchain, it could be over used as a solution looking for a problem.鈥�
There was also another prediction, suggesting that machine learning will also have a part to play in the future of collateral optimisation. The panellist explained that with an ever-changing regulatory environment you never know what might happen next.
During another panel, which featured Armeet Sandu of StoneWain, Boaz Yaari of Shargain, Matthew Harrison of Trading Apps and Tammy Phillips of SBL Network, distributed ledger technology (DLT) was also discussed.
It was agreed that in one way or another, DLT will help to transform the industry over the next three to five years.
According to the speakers, firms are trying to find their own way into such technologies.
However, one panellist explained that the industry should hold back until it becomes standardised in the industry.
He said: 鈥溚怨� lending can do a lot to innovate without using blockchain in the next three to five years.鈥�
Another panellist agreed with an earlier panellist, again suggesting that blockchain is a solution looking for a problem.
The speaker commented: 鈥淎s these technologies are rolled out, people will experiment with them to see how they can be used within the business.鈥�
However, another industry participant disagreed with the statement, suggesting that blockchain can be used to create something new in the industry鈥攐ne example included cost savings.
The panellist explained: 鈥淓verything we talk about is simplistic, transparent and secure, so why couldn鈥檛 blockchain help with that.鈥�
With regulatory changes, there will be more transparency, more automation and an increase in the reliance on technology firms. One panellist said that the winners in this new world would be the ones who develop platforms that slot easily into legacy systems and take advantage of what is already there.
The panellist said that his company, a technology provider, has spoken to many institutions and, 鈥渂y and large, their technology is terrible鈥�, while another added that technology companies are using cutting-edge technology, while participants are using legacy systems.
To adapt, changes will have to be made to these systems. It was noted that these are not small changes, but larger, wider reaching ones. A panellist said that the current market infrastructure has 鈥渂een there for decades鈥�.
One speaker was suprised at how the participants鈥� ability to evolve has been hampered in recent years, by regulation and other challenges. He commented: 鈥淪omething that used to take months can now take years.鈥�
鈥淭hey don鈥檛 have the ability to evolve fast enough. If you look at other industries鈥攅very bank is investing in technology鈥攊n other industries, people would say why are you investing in technology? Instead get it from a technology vendor.鈥�
鈥淭he current state of technology is not where it needs to be. It鈥檚 not going to get us to the market structures we want.鈥�
DLT also featured in the collateral liquidity platforms session. The panel, which included Bill Foley of SecFin Hub, David Raccat or WeMatch.网爆吃瓜Financing, Gabriele Frediani of Elixium and Guido Stroemer of HQLAx, suggested that DLT could be a solution to manage challenges around regulation.
It was suggested that DLT can help with implementing the latest regulatory changes, as well as offering great benefits to those involved in collateral trades.
One panellist explained that while DLT is often seen as overhyped and criticised for having solutions to problems that have yet to exist, it can be a useful tool in benefiting and working through new regulation.
For the regulatory community in the securities lending space, technology can provide a better overview on collateral change, while regulators can access to a network that lets them see more, according to one speaker.
However, there are still challenges to be had when building a new platform with new technology, and there are lots of boxes to tick.
During the post-trade panel, which included Dan Barnes of The Desk, Iain Mackay of EquiLend, James Hollands of DTCC, Rajen Sheth of Pirum Systems and David Morris of RegTek Solutions, it was suggested that firms must look to improve efficiency after implementing new regulatory measures.
The panel explained that following the implementation of regulatory initiatives, firms should look to take efficiency measures and make 鈥渉olistic鈥� changes to their operating models. One panellist said: 鈥淭he mantra, from a post-trade perspective, is that you need to do more with less鈥攈ow do you keep it efficient and get increased volume while using fewer resources?鈥�
Another panellist added: 鈥淭his is the kind of challenge that firms have to sit down and think about鈥攖he tactical issues, the more strategic benefits.鈥�
Panellists discussed how most firms have to keep their heads down and deal with regulatory deadlines to ensure compliance. Often, this doesn鈥檛 leave a lot of room to create efficient operating models.
The implementation of these regulations may impact operations as it is. One panellist said that he is very focused on the trade repositories (TRs) that are involved in regulatory implementation. He said that firms have to understand the requirements, what the fields represent and what they have to be.
The panellist added that, if firms don鈥檛 get it right, they could be seeing a fallout that will ultimately sit with the operating models. He said: 鈥淔irms should not be wasting any moment, because we only have about 12 months to get this right. If they do get it right, there will be great benefits.鈥�
The panellist concluded that having a dialogue with TRs is important. He explained: 鈥淭he dialect with trade repositories needs to be more obvious, we need to know exactly what they鈥檙e doing in terms of solutions already being discussed. Firms needs to understand what TRs are doing. They need to sit down, find out what these regulations mean and figure out a solution.鈥�
Finally, panellists said firm鈥檚 should not delay when implementing reporting requirements. They agreed that the industry should not delay, as there鈥檚 鈥渟o much to do鈥�.
鈥淪tart early, think strategically鈥�, said another panelist.
Dyson concluded the day with a few closing remarks. Referencing the discussions around SFTR, he said that SFTR casts a very long shadow over the industry, but it will not disappear so firms should think about how they will have to comply with it. He advised firms: 鈥淒on鈥檛 delay, the clock is ticking.鈥�
A special thank you to all the sponsors for supporting SLT鈥檚 first technology conference, and to all those who attended and made the day a great success. Be sure to look out for our next event in the near future.
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