Bringing the heat
16 October 2018
Attendees at this year鈥檚 RMA Conference on 网爆吃瓜 Lending in Miami heard all about SFTR, technology and equality
Image: Shutterstock
In Miami, Florida, the quiet island town of Key Biscayne faced the insurmountable challenge of playing host to some of the biggest questions (and answers) in the securities finance industry.
For attendees of the Risk Management Association鈥檚 35th Annual Conference on 网爆吃瓜 Lending, old flames, such as the disruption of the 网爆吃瓜 Finance Transactions Regulation (SFTR) continued to burn, while new challenges crept on the periphery.
In one panel at the event, those concerned about the volume of reporting under SFTR heard from speakers discussing how the regulation could prove difficult for intraday reporting.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will 鈥渄rive volume鈥� under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because 鈥渘othing will clarify the industry鈥檚 response like a deadline鈥�.
Panellists said this was a 鈥渢all order鈥� for associations and industry bodies, such as the International 网爆吃瓜 Lending Association, which is currently working on guidelines.
鈥淚 think at this point we all agree we aren鈥檛 going to get more clarifications from the regulations. It鈥檚 on the industry to band together and have a consistent approach鈥�, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm鈥檚 using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the 鈥渋ndustry that needs to be taken care of鈥�.
The speaker said: 鈥淭here鈥檚 definitely a lot of concern in the industry on fees. We looked at the way we price under the European Market Infrastructures Regulation, which is based on a trade-based unique transaction identifier.鈥�
鈥淲e questioned if this was a fair model under SFTR, but we don鈥檛 believe it is. We鈥檙e moving to a submission-based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.鈥�
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was 鈥渢oo much鈥�.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation. Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could 鈥渃o-exist in the short to medium term鈥�, but promoted SFTR as providing a 鈥渉igher degree of granularity鈥�.
Regulations also proved to be a driving force for some of the other topics discussed at the event, including the upcoming shift towards structured data, which some panellists said would provide great value to the industry.
In a panel discussion on the rise of financial technology and its impact on the industry, one speaker explained that regulations are forcing firms to live in a more digitised environment, which can be made harder by the persistence of unstructured data.
According to the speaker, unstructured data will make the move to distributed ledger technology and smart contracts much harder.
Another speaker noted that 90 percent of the world鈥檚 data has been generated in the last two years, highlighting the fact that the majority of this is unstructured data, which needs to be turned into structured data.
Once this has happened, firms can implement big data strategies to understand and draw value from structured data.
A panellist remarked on the computer science phrase 鈥済arbage in, garbage out鈥�, which refers to flawed or nonsense input data that produces nonsense output.
The panellist said this would be different in the future, as the industry鈥檚 ability to apply machine learning techniques to unstructured data will allow firms to 鈥渞eap garbage and create value鈥�, effectively turning unstructured data into a commodity. In the future, hedge funds and other participants may even request unstructured data so that they can curate it themselves and create their own value.
However, the speaker said that the industry still had 鈥渓egacy systems鈥�, despite the fact that the 鈥渆asiest thing to do in this century is replicate things digitally鈥�.
While other industries, such as the entertainment industry, has been affected by this digitisation, the securities finance industry remains on these legacy systems, but the panellist warned that distributed ledger technology (DLT) would be the biggest disruptive technology in the industry.
According to the speaker, DLT will allow firms to share information across a peer-to-peer network while knowing with certainty that all participants will be seeing the same thing.
Another panellist warned that firms should be investing in this technology now because when it goes live it will be too late.
They said that firms would be at a 鈥渄isadvantage鈥� if they don鈥檛 put the work in now. Panellists identified people as the biggest barrier to new technologies and said that firms shouldn鈥檛 be afraid to implement these new technologies and 鈥渋mplement processes鈥�.
One panellist said: 鈥淟everaging technology and using it in a smart governed way, that is one of the facilitators, not necessarily a barrier to entry.鈥�
Another panellist remarked that business models will change, so firms should not be scared of getting rid of departments or changing their business.
The panellist said that firms shouldn鈥檛 fear to re-engineer their old processes, as these new technologies grant them the tools to make the changes.
With new technologies and new tools comes the dilemma of directing your investment. In another session, speakers at the conference argued that firms shouldn鈥檛 just innovate for innovation鈥檚 sake, but rather look to provide solutions to problems in
the industry.
The speaker said that the industry needs to carefully decide what technology it should be investing in, as the financial technology market is booming, leaving firms questioning which service provider is the right one they should be partnering with.
Panellists discussed the rise of financial technology companies in the industry, warning that firms should be picky to ensure they get the right solution to their problem.
The panellist also questioned whether firms should be developing in-house systems or working with service providers. He said: 鈥淒o you build your own platform in-house? Do you get a platform to take you 80 percent there and then do the rest with your own intellectual property?鈥�
With the added danger of upcoming regulations, technology is becoming more important than ever to ensure smooth transitioning, and panellists agreed that the use of big data can help to ease some of the burden brought by these regulations.
It was evident at the conference that those in the industry were seeing the wheels of progress turning, both in technology and in other emerging issues, such as equality.
One session at the conference was dedicated to women in the securities finance industry, where panellists discussed how women must 鈥渇oster a connection鈥� between each other to 鈥渆mpower鈥� themselves professionally and promote their interests.
Speakers talked about the importance of networking, their driving forces in the industry, mentorship, confidence, and cognitive and observable diversity.
One speaker, reflecting on her career, said that her driving force has been to 鈥渓earn more鈥� and 鈥渂e the best I can be鈥�.
She expressed the importance of taking risks in her career and expressed the hope that others in the industry would follow
that ethos.
鈥淚n terms of turning points throughout my career, there have been times that I have taken risks, that鈥檚 when everything has paid off鈥�, she said, 鈥渢ake calculated risks, even in times that they don鈥檛 seem to
be obvious鈥�.
Another speaker discussed how one of the worst mistakes she made in her career was not taking the aforementioned advice.
She explained: 鈥淚 worked hard and was good at what I did, but I didn鈥檛 ask for new positions. Part of me thought somebody would notice my hard work and give me a new position.鈥�
鈥淵ou need to speak up to let your managers know you are interested in other positions. To assume that will happen on its own is probably a mistake.鈥�
Another speaker said that people should 鈥渃hallenge the status quo鈥� and 鈥渁sk difficult questions鈥�.
The speaker remarked that firms should be 鈥渃ultivating an opportunity to allow people to step back from their day to day, think about what they are doing, and cultivate an interest in something new, then they can take the risk.鈥�
For some people, mentorship and sponsorship is a good avenue to aid in gaining recognition, they said.
One speaker explained the benefits of mentorship and sponsorship, especially for women and diverse candidates.
Another speaker said that she had benefited from two sponsors who had championed her career and helped her
gain recognition.
Later, speakers discussed confidence and observed its importance when rising through the ranks, building and running a business, and in networking.
One speaker said that confidence is a requirement for success, while another shared the advice she received early in her career: 鈥淲hatever you do, just be confident, and don鈥檛 screw up.鈥�
Speakers reflected on the importance of preparedness in bringing about this confidence, and one panellist said that this confidence 鈥渄oesn鈥檛 come easy for a lot of women鈥�.
鈥淔or me, confidence comes when I am prepared鈥�, she said, 鈥渋t also comes when you are authentic to yourself and vocalise what your thoughts are.鈥�
鈥淚n order to be truly confident, you have to make sure nobody takes your power away. If you are hosting a meeting, you need to host it. Sit at the head of the table and stop people from talking
over you.鈥�
She concluded: 鈥淚t鈥檚 difficult and hard to navigate, but if you approach it in the right way, it is instrumental in building your confidence.鈥�
Another important part of continuing progression is ensuring you have a passion for your craft. A panellist said it was easy to lose this passion when working too hard.
One speaker said that passion is 鈥渃ritical鈥� in everything. She explained: 鈥淚t鈥檚 all intertwined, it鈥檚 infectious.鈥�
Speaking to a room of majority women as a growing movement of diversity and inclusion takes over the industry, the speaker said: 鈥淓veryone in this room is accomplished, and has probably had a tough time getting here. It鈥檚 passion that
drives you.鈥�
Almost 30 percent of speakers at the event were women, according to Tamela Merriweather, conference co-chair at
the event.
In the conference鈥檚 welcome remarks, Merriweather revealed the statistic, which is a growth of nearly 20 percent over the past five years.
Merriweather also revealed that 20 percent of the conference attendees were women, which is around a 5 percent rise from 2016.
This year鈥檚 event drew in a total of 515 attendees, with nearly
50 speakers.
For attendees of the Risk Management Association鈥檚 35th Annual Conference on 网爆吃瓜 Lending, old flames, such as the disruption of the 网爆吃瓜 Finance Transactions Regulation (SFTR) continued to burn, while new challenges crept on the periphery.
In one panel at the event, those concerned about the volume of reporting under SFTR heard from speakers discussing how the regulation could prove difficult for intraday reporting.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will 鈥渄rive volume鈥� under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because 鈥渘othing will clarify the industry鈥檚 response like a deadline鈥�.
Panellists said this was a 鈥渢all order鈥� for associations and industry bodies, such as the International 网爆吃瓜 Lending Association, which is currently working on guidelines.
鈥淚 think at this point we all agree we aren鈥檛 going to get more clarifications from the regulations. It鈥檚 on the industry to band together and have a consistent approach鈥�, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm鈥檚 using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the 鈥渋ndustry that needs to be taken care of鈥�.
The speaker said: 鈥淭here鈥檚 definitely a lot of concern in the industry on fees. We looked at the way we price under the European Market Infrastructures Regulation, which is based on a trade-based unique transaction identifier.鈥�
鈥淲e questioned if this was a fair model under SFTR, but we don鈥檛 believe it is. We鈥檙e moving to a submission-based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.鈥�
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was 鈥渢oo much鈥�.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation. Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could 鈥渃o-exist in the short to medium term鈥�, but promoted SFTR as providing a 鈥渉igher degree of granularity鈥�.
Regulations also proved to be a driving force for some of the other topics discussed at the event, including the upcoming shift towards structured data, which some panellists said would provide great value to the industry.
In a panel discussion on the rise of financial technology and its impact on the industry, one speaker explained that regulations are forcing firms to live in a more digitised environment, which can be made harder by the persistence of unstructured data.
According to the speaker, unstructured data will make the move to distributed ledger technology and smart contracts much harder.
Another speaker noted that 90 percent of the world鈥檚 data has been generated in the last two years, highlighting the fact that the majority of this is unstructured data, which needs to be turned into structured data.
Once this has happened, firms can implement big data strategies to understand and draw value from structured data.
A panellist remarked on the computer science phrase 鈥済arbage in, garbage out鈥�, which refers to flawed or nonsense input data that produces nonsense output.
The panellist said this would be different in the future, as the industry鈥檚 ability to apply machine learning techniques to unstructured data will allow firms to 鈥渞eap garbage and create value鈥�, effectively turning unstructured data into a commodity. In the future, hedge funds and other participants may even request unstructured data so that they can curate it themselves and create their own value.
However, the speaker said that the industry still had 鈥渓egacy systems鈥�, despite the fact that the 鈥渆asiest thing to do in this century is replicate things digitally鈥�.
While other industries, such as the entertainment industry, has been affected by this digitisation, the securities finance industry remains on these legacy systems, but the panellist warned that distributed ledger technology (DLT) would be the biggest disruptive technology in the industry.
According to the speaker, DLT will allow firms to share information across a peer-to-peer network while knowing with certainty that all participants will be seeing the same thing.
Another panellist warned that firms should be investing in this technology now because when it goes live it will be too late.
They said that firms would be at a 鈥渄isadvantage鈥� if they don鈥檛 put the work in now. Panellists identified people as the biggest barrier to new technologies and said that firms shouldn鈥檛 be afraid to implement these new technologies and 鈥渋mplement processes鈥�.
One panellist said: 鈥淟everaging technology and using it in a smart governed way, that is one of the facilitators, not necessarily a barrier to entry.鈥�
Another panellist remarked that business models will change, so firms should not be scared of getting rid of departments or changing their business.
The panellist said that firms shouldn鈥檛 fear to re-engineer their old processes, as these new technologies grant them the tools to make the changes.
With new technologies and new tools comes the dilemma of directing your investment. In another session, speakers at the conference argued that firms shouldn鈥檛 just innovate for innovation鈥檚 sake, but rather look to provide solutions to problems in
the industry.
The speaker said that the industry needs to carefully decide what technology it should be investing in, as the financial technology market is booming, leaving firms questioning which service provider is the right one they should be partnering with.
Panellists discussed the rise of financial technology companies in the industry, warning that firms should be picky to ensure they get the right solution to their problem.
The panellist also questioned whether firms should be developing in-house systems or working with service providers. He said: 鈥淒o you build your own platform in-house? Do you get a platform to take you 80 percent there and then do the rest with your own intellectual property?鈥�
With the added danger of upcoming regulations, technology is becoming more important than ever to ensure smooth transitioning, and panellists agreed that the use of big data can help to ease some of the burden brought by these regulations.
It was evident at the conference that those in the industry were seeing the wheels of progress turning, both in technology and in other emerging issues, such as equality.
One session at the conference was dedicated to women in the securities finance industry, where panellists discussed how women must 鈥渇oster a connection鈥� between each other to 鈥渆mpower鈥� themselves professionally and promote their interests.
Speakers talked about the importance of networking, their driving forces in the industry, mentorship, confidence, and cognitive and observable diversity.
One speaker, reflecting on her career, said that her driving force has been to 鈥渓earn more鈥� and 鈥渂e the best I can be鈥�.
She expressed the importance of taking risks in her career and expressed the hope that others in the industry would follow
that ethos.
鈥淚n terms of turning points throughout my career, there have been times that I have taken risks, that鈥檚 when everything has paid off鈥�, she said, 鈥渢ake calculated risks, even in times that they don鈥檛 seem to
be obvious鈥�.
Another speaker discussed how one of the worst mistakes she made in her career was not taking the aforementioned advice.
She explained: 鈥淚 worked hard and was good at what I did, but I didn鈥檛 ask for new positions. Part of me thought somebody would notice my hard work and give me a new position.鈥�
鈥淵ou need to speak up to let your managers know you are interested in other positions. To assume that will happen on its own is probably a mistake.鈥�
Another speaker said that people should 鈥渃hallenge the status quo鈥� and 鈥渁sk difficult questions鈥�.
The speaker remarked that firms should be 鈥渃ultivating an opportunity to allow people to step back from their day to day, think about what they are doing, and cultivate an interest in something new, then they can take the risk.鈥�
For some people, mentorship and sponsorship is a good avenue to aid in gaining recognition, they said.
One speaker explained the benefits of mentorship and sponsorship, especially for women and diverse candidates.
Another speaker said that she had benefited from two sponsors who had championed her career and helped her
gain recognition.
Later, speakers discussed confidence and observed its importance when rising through the ranks, building and running a business, and in networking.
One speaker said that confidence is a requirement for success, while another shared the advice she received early in her career: 鈥淲hatever you do, just be confident, and don鈥檛 screw up.鈥�
Speakers reflected on the importance of preparedness in bringing about this confidence, and one panellist said that this confidence 鈥渄oesn鈥檛 come easy for a lot of women鈥�.
鈥淔or me, confidence comes when I am prepared鈥�, she said, 鈥渋t also comes when you are authentic to yourself and vocalise what your thoughts are.鈥�
鈥淚n order to be truly confident, you have to make sure nobody takes your power away. If you are hosting a meeting, you need to host it. Sit at the head of the table and stop people from talking
over you.鈥�
She concluded: 鈥淚t鈥檚 difficult and hard to navigate, but if you approach it in the right way, it is instrumental in building your confidence.鈥�
Another important part of continuing progression is ensuring you have a passion for your craft. A panellist said it was easy to lose this passion when working too hard.
One speaker said that passion is 鈥渃ritical鈥� in everything. She explained: 鈥淚t鈥檚 all intertwined, it鈥檚 infectious.鈥�
Speaking to a room of majority women as a growing movement of diversity and inclusion takes over the industry, the speaker said: 鈥淓veryone in this room is accomplished, and has probably had a tough time getting here. It鈥檚 passion that
drives you.鈥�
Almost 30 percent of speakers at the event were women, according to Tamela Merriweather, conference co-chair at
the event.
In the conference鈥檚 welcome remarks, Merriweather revealed the statistic, which is a growth of nearly 20 percent over the past five years.
Merriweather also revealed that 20 percent of the conference attendees were women, which is around a 5 percent rise from 2016.
This year鈥檚 event drew in a total of 515 attendees, with nearly
50 speakers.
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