All I want for 2021 is ...
05 January 2021
SFT asked 21 firms about their 2021 wishlist. Adapting to the new regulatory environment was the most popular answer alongside further modernisation and a return to normality post-COVID. Interestingly, ESG was not a dominant trend
Image: stock.adobe.com/Romolo Tavani
For many businesses, the cacophony of challenges last year made the labours of Hercules look like a walk in the park. The intertwined pressures of a novel virus outbreak, economic chaos, rising rate of unemployment, a socially distanced Christmas, and a (sort of) conclusion to Brexit, added up to a troublesome 2020 for the majority.
Despite the onslaught, many businesses are still standing and have taken away some key lessons from the disruption that can be applied in the new year. Some of these ambitions have translated into a 2021 wishlist that, with a little luck and barring the wrath of Hades will lead to a much perkier 2021.
Of the 21 securities finance market participants SFT spoke to, the top wish is to have a bit of normality return. In particular, Maurice Leo, director of agency securities lending at Deutsche Bank, speaks for all of us when he says he would very much like to get back to drinking tepid coffee and consuming cold pain-au-chocolats with clients and prospects at industry conferences, as well as looking forward to renewing the mental dexterity challenge of fitting toiletries for an international business trip into an airline compliant carry on plastic bag. Another stressing factor adding emotional baggage is Brexit. REGIS-TR along with six other firms are hoping to have some breathing space after Brexit, and the majority of firms are looking forward to seeing the back-end of the ordeal. Elsewhere, despite several COVID-19 driven delays, the demanding regulatory agenda is easing and 13 firms surveyed are hoping that 2021 brings some stability to the regulatory reporting industry.
Finally, the pandemic has shown many firms within securities finance that the market needs to modernise. Market participants agreed that deploying advanced technology can enhance aspects within the industry and several are keeping a close eye on the development of the International 麻豆传媒 Lending Association鈥檚 common domain model (CDM) initiative which completed its pilot phase in December and is expected to make further advancements this year.
Interestingly, despite the background noise of environmental, social and governance (ESG) growing substantially in 2020, only a handful of respondents singled sustainable financing out as something for the wishlist.
The more than two-dozen respondents are reviewed and analysed by category below.
Technology
Technology is finally democratising securities lending and with the help of a pandemic opening firms eyes up to the possibilities advanced technology can bring, 鈥渋t鈥檚 time to bring securities lending into the digital age,鈥� says Sharegain founder and CEO Boaz Yaari.
Yaari adds: 鈥淢y hope for 2021 is that, post-COVID-19, we have a proper reset and refocus on what the next nine years will hold for securities lending. Regulatory changes won鈥檛 be the biggest trend of the 2020s. This decade will be about user experience, application programming interfaces, settlements on a distributed ledger and greater access to this lucrative ecosystem for private and institutional investors.鈥�
Sunil Daswani, global head of securities lending, financial markets at Standard Chartered, backs this theory up, saying: 鈥溌槎勾� lending as an industry, like many others, is anticipated to go through major changes in 2021 mainly by use of advanced technology鈥�. He explains that the deployment of technology will help efficient remote working, and they are expecting to see more cloud-based solutions across the business. Technology will also enhance ESG internal requirements to be applied when securities are loaned and collateral accepted. Blockchain and distributed ledger technology (DLT) will allow lenders to be agnostic of who the custodian is when lending securities and again transaction costs thereby being reduced.
Meanwhile, Delta Capita claims that 2021 is a year of overhauling knowing-your-customer (KYC). Tracey Allen, COO, CLM managed services explains that KYC processes are evolving to lower costs whilst still maintaining regulatory compliance, leveraging new innovative data solution technology which can reinvent the way data is collected and used.
If we take a look at the International Swaps and Derivatives Association (ISDA), its core strategic objective it has been to foster greater use of technology to increase efficiencies and reduce costs for both derivatives and securities financing transaction markets. Both ISDA and ISLA have done considerable work in 2020 to achieve these objectives.
Through the development of the ISDA and ISLA clause libraries, collaboration on the CDM 鈥� which establishes digital standards for trade events and processes 鈥� and expansion of our electronic contract opinions. Ciar谩n McGonagle, assistant general counsel on behalf of ISDA and ISLA, says: 鈥淲e very much want to push this further throughout 2021, as both markets stand to benefit from greater digitisation of documentation, data and processes. Furthermore, ISLA is currently working to model and code specific securities financing transaction components for inclusion in the CDM, bringing them closer to creation of an industry wide, product-agnostic model for financial transactions.
McGonagle adds: 鈥淲e very much want to push this further throughout 2021, as both markets stand to benefit from greater digitisation of documentation, data and processes. Ultimately, we are hoping that 2021 brings us closer to our vision of a digital future for our members and our markets鈥�.
Torstone Technology has a similar outlook and suggests firms are recognising the need to remove operational inefficiencies and legacy models from the middle and back office in order to create better, faster and more agile operations. 鈥淎s we look ahead, firms must continue to re-evaluate their current processes with a view to better supporting remote working and dealing with continued market volatility, in addition to satisfying regulatory demands for improved operational resilience鈥�.
Elsewhere, LEI Worldwide are set on navigating the fundamental shift being brought on by DLT and central bank digital currencies. Darragh Hayes, director, LEI Worldwide, explains: 鈥淥ur wish is that actors throughout the international financial system start to understand how Decentralised Finance solutions based on blockchain protocols are set to fundamentally disrupt the industry. The legal entity identifier is a critical part of that puzzle.鈥�
Globalisation
Outside of Europe, regulation has also significantly changed in Asia, where China loosened its Qualified Foreign Institutional Investor (QFII) scheme, a programme that allows specified licenced international investors to participate in mainland China鈥檚 stock exchanges. The QFII programme allows foreign institutional investors to buy and sell yuan-denominated A shares of Chinese companies.
In this vein, eSecLending is looking to real advances during 2021 in the opening of a number of new securities lending markets for offshore participants, including the development of a clear roadmap for the lending of China 鈥楢鈥� shares.
Simon Lee, managing director, business development, Europe, the Middle East and Africa, and Asia Pacific at eSecLending, says: 鈥淓ntering any new lending market is always exciting, and for early adopters like eSecLending, opening a new market for our clients can provide material revenue upside for their lending activities, as well it can open up lending opportunities for new clients with investment portfolios focused in emerging and frontier markets that may have not previously participated in lending programmes.鈥�
Regulatory changes
In the wake of the 麻豆传媒 Financing Transactions Regulation (SFTR) and other frameworks, not to mention Brexit adapting to a new reporting environment is, unsurprisingly, a priority for firms as we approach 2021.
Val Wotton, managing director of product development and strategy, repository and derivatives services at DTCC saat that adapting to a new reporting environment following the end of the UK鈥檚 transition period, where firms will have dual SFTR, EMIR and MiFIR reporting obligations in the UK and EU, is a priority for firms in 2021.
鈥淭hese new reporting obligations will likely require enhancements to reporting infrastructure and other improvements to post-trade processes,鈥� he explains. 鈥淲orking in collaboration with other firms and with experienced service providers will help to ensure that organisations can achieve compliance with greater ease and certainty.鈥�
Matt Johnson, associate director, ITP product management at DTCC, adds that, in order to be ready for the February 2022 implementation SDR deadline, market participants need to have already conducted an analysis of their post trade processes in order to expose any weaknesses, allowing sufficient time for them to be addressed.
He continues: 鈥淔or those firms who intend working with an external provider to increase post trade efficiency, the selection process for this needs to have been completed by the end of March 2021, to provide ample time for onboarding and for testing to start in June, just over six months prior to SDR implementation.鈥�
In addition, with just one year remaining before the Central 麻豆传媒 Depositories Regulation鈥檚 settlement discipline regime (SRD) enters into force, maybe, DTCC says firms must focus on improving settlement efficiency in order to avoid the cost of penalties for trades which fail to settle on time and firms should identify and address any weaknesses in their post-trade processes.
Those who plan to work with an external provider to increase post-trade efficiency should make their selection by March 2021, in order to have ample time for onboarding and testing, well before the February 2022 SDR deadline.
Sharegain鈥檚 Yaari, believes that 鈥�2020 may have been the start of a new decade, but the industry鈥檚 focus hasn鈥檛 moved on from the 2010s: SFTR, CSDR, Markets in Financial Instruments Directive (MiFID) II, Brexit have continued to suck the air out of the room鈥�.
With the fourth phase of SFTR regulation coming into effect in January for the EU but not the UK, firms such as UnaVista and Caceis are looking for the market to keep up its focus on being ready for those final deadlines.
Catherine Talks, SFTR product manager at UnaVista, says: 鈥淲e have seen some issues that have required working through, such as ensuring EU branches of non-EU entities are accurately reflected in counterparty reports. Non-financial parties located in the UK are not reportable under the UK regulation, however if they have a branch in the EU then that would be reportable under the EU regulation鈥�.
Dan Copin, head of equity finance at Cacies, also hopes that markets will manage to sufficiently optimise their trading strategies to better handle the complex reporting workflows that SFTR requires - for CSDR, implementation is just not going to be easy for anybody. Both firms stress the importance of continuing the strong engagement across the market to ensure a smooth go-live.
Ronen Kertis, CEO of Cappitech, says: 鈥淪FTR transaction reporting is complex and as the year progresses, the initial teething problems from the first phase of SFTR implementation will also need to be ironed out. To add insult to injury, firms will be managing this while faced with limited budgets thanks to the worldwide pandemic, as well as greater reporting demands coming from further updates to many existing regulations and the introduction of new reporting regimes.鈥�
Darren Crowther, general manager, securities finance and collateral management of Broadridge, also comments that the industry would benefit from final clarity and agreement on how partial settlements workflows will impact the downstream market utilities and SFTR report.
Deutsche Bank鈥檚 Leo suggests that the CDM has the potential to 鈥渟ubstantively transform the manner in which we negotiate and manage documentation and transactions in the future. The standardisation features and industry collaboration that underpinned the delivery of SFTR will support the continued advancement of CDM in our industry.鈥�
Moving away from the headline act of SFTR, Leo adds that series five of Uncleared Margin Rules (UMR) is highly anticipated. The plot thickens, as institutional investors have to manage the competing affections of securities lending, repo and collateralisation requirements. It will be a busy finale but we expect a happy ending as institutional investors gravitate towards outsourced trading solutions offered by agents such as Deutsche Bank鈥�.鈥�
Elsewhere, the Alternative Reference Rates Committee (ARRC), says 2020 ended strongly as US and UK regulators, and LIBOR鈥檚 administrator, made a series of announcements which collectively proposed an endgame for the US dollar LIBOR.
The ARRC is a group of private-market participants convened by the US Federal Reserve Board and the New York Fed to help ensure a successful transition from US dollar, and the London Interbank Offered Rate (LIBOR) to a more robust reference rate,
Significantly, the committee notes that part of this rate transition endgame was supervisory guidance encouraging banks not to enter new LIBOR contracts after 2021.
Tom Wipf, vice chairman of institutional securities at Morgan Stanley and chairman of the ARRC, explains: 鈥淭his endorsement of ARRC鈥檚 position has made our wishlist for 2021 shorter, but at the top of it remains the need for a legislative solution for 鈥渢ough legacy鈥� contracts. A legislative solution in 2021 would mark a major milestone in the transition away from LIBOR.鈥�
ESG
Many if not all agent lenders identify ESG as an important area that needs to evolve within their securities lending programmes to help asset owners better understand their options in this arena. In early October a survey of 44 leading institutional investors revealed that almost all respondents believed that securities lending activities can coexist with ESG principles, according to the Risk Management Association (RMA).
ESG regulations will start to take effect in 2021 with the Sustainable Finance Disclosure Regulation (SFDR) commencing in the EU, requiring asset managers to categorise and disclose their funds according to climate and wider environmental criteria. Regulators are also consulting on ESG in Hong Kong and Singapore.
Sebastien Danloy, global head of asset owners and managers, markets and securities services at HSBC, says: 鈥淚n 2020 ESG investing went from niche to norm with greater inflows and much interest from our clients. We have launched an ESG portfolio reporting product which offers a choice of leading ESG data providers, so that the differing results can be easily compared, to provide meaningful insights for our clients until quantitative ESG data becomes available.鈥�
Mark Snowdon, head of capital markets, Asia Pacific, for Northern Trust, says: 鈥渟ecurities lending is no longer a standalone product. In 2021, we expect securities finance will become a key driver of asset owner/manager decisions around the appointment of asset servicing providers. Northern Trust is committed to delivering a holistic solution allowing its clients to optimise their investments across the value chain and for a wide range of purposes.鈥�
Scott Brown, director of business development at Pirum, concludes: 鈥淓arly 2021 will not be materially different to 2020. I cross my fingers for the adoption and impact of the various COVID-19 vaccinations, as this will be definitive in boosting the global economy. The securities finance market will still see many firms with personnel working from home full-time to the end of Q1.
鈥淲ithout commuters and travel, oil prices will not reach pre-COVID levels and ESG will remain a key focus for the industry and become more intrinsic to the practice of firms transacting SFTs. With the latter phases of UMR and CSDR coming in the next two years, the adage remains; 鈥淎n ounce of prevention is worth a pound of cure.鈥�
Conclusion
With Brexit in the rearview mirror, regulatory change headed our way and technology looking to speed up and efficiently change the way we work within securities finance, 2021 is looking like more than just a silver lining around the dark cloud that has been 2020. As David Raccat, co-founder and head of EMEA at WeMatch, puts it: 鈥淭he industry is clearly at a turning point, it is more receptive to change and the pace will accelerate once the sanitary crisis is behind us for good. The journey towards more transparency is only at its beginning and electronification of the business will help to provide more accurate information to all categories of players.鈥� Raccat believes transparency will accompany the industry into its digital journey and it has never been so exciting and the perspectives are extremely encouraging.
Despite the onslaught, many businesses are still standing and have taken away some key lessons from the disruption that can be applied in the new year. Some of these ambitions have translated into a 2021 wishlist that, with a little luck and barring the wrath of Hades will lead to a much perkier 2021.
Of the 21 securities finance market participants SFT spoke to, the top wish is to have a bit of normality return. In particular, Maurice Leo, director of agency securities lending at Deutsche Bank, speaks for all of us when he says he would very much like to get back to drinking tepid coffee and consuming cold pain-au-chocolats with clients and prospects at industry conferences, as well as looking forward to renewing the mental dexterity challenge of fitting toiletries for an international business trip into an airline compliant carry on plastic bag. Another stressing factor adding emotional baggage is Brexit. REGIS-TR along with six other firms are hoping to have some breathing space after Brexit, and the majority of firms are looking forward to seeing the back-end of the ordeal. Elsewhere, despite several COVID-19 driven delays, the demanding regulatory agenda is easing and 13 firms surveyed are hoping that 2021 brings some stability to the regulatory reporting industry.
Finally, the pandemic has shown many firms within securities finance that the market needs to modernise. Market participants agreed that deploying advanced technology can enhance aspects within the industry and several are keeping a close eye on the development of the International 麻豆传媒 Lending Association鈥檚 common domain model (CDM) initiative which completed its pilot phase in December and is expected to make further advancements this year.
Interestingly, despite the background noise of environmental, social and governance (ESG) growing substantially in 2020, only a handful of respondents singled sustainable financing out as something for the wishlist.
The more than two-dozen respondents are reviewed and analysed by category below.
Technology
Technology is finally democratising securities lending and with the help of a pandemic opening firms eyes up to the possibilities advanced technology can bring, 鈥渋t鈥檚 time to bring securities lending into the digital age,鈥� says Sharegain founder and CEO Boaz Yaari.
Yaari adds: 鈥淢y hope for 2021 is that, post-COVID-19, we have a proper reset and refocus on what the next nine years will hold for securities lending. Regulatory changes won鈥檛 be the biggest trend of the 2020s. This decade will be about user experience, application programming interfaces, settlements on a distributed ledger and greater access to this lucrative ecosystem for private and institutional investors.鈥�
Sunil Daswani, global head of securities lending, financial markets at Standard Chartered, backs this theory up, saying: 鈥溌槎勾� lending as an industry, like many others, is anticipated to go through major changes in 2021 mainly by use of advanced technology鈥�. He explains that the deployment of technology will help efficient remote working, and they are expecting to see more cloud-based solutions across the business. Technology will also enhance ESG internal requirements to be applied when securities are loaned and collateral accepted. Blockchain and distributed ledger technology (DLT) will allow lenders to be agnostic of who the custodian is when lending securities and again transaction costs thereby being reduced.
Meanwhile, Delta Capita claims that 2021 is a year of overhauling knowing-your-customer (KYC). Tracey Allen, COO, CLM managed services explains that KYC processes are evolving to lower costs whilst still maintaining regulatory compliance, leveraging new innovative data solution technology which can reinvent the way data is collected and used.
If we take a look at the International Swaps and Derivatives Association (ISDA), its core strategic objective it has been to foster greater use of technology to increase efficiencies and reduce costs for both derivatives and securities financing transaction markets. Both ISDA and ISLA have done considerable work in 2020 to achieve these objectives.
Through the development of the ISDA and ISLA clause libraries, collaboration on the CDM 鈥� which establishes digital standards for trade events and processes 鈥� and expansion of our electronic contract opinions. Ciar谩n McGonagle, assistant general counsel on behalf of ISDA and ISLA, says: 鈥淲e very much want to push this further throughout 2021, as both markets stand to benefit from greater digitisation of documentation, data and processes. Furthermore, ISLA is currently working to model and code specific securities financing transaction components for inclusion in the CDM, bringing them closer to creation of an industry wide, product-agnostic model for financial transactions.
McGonagle adds: 鈥淲e very much want to push this further throughout 2021, as both markets stand to benefit from greater digitisation of documentation, data and processes. Ultimately, we are hoping that 2021 brings us closer to our vision of a digital future for our members and our markets鈥�.
Torstone Technology has a similar outlook and suggests firms are recognising the need to remove operational inefficiencies and legacy models from the middle and back office in order to create better, faster and more agile operations. 鈥淎s we look ahead, firms must continue to re-evaluate their current processes with a view to better supporting remote working and dealing with continued market volatility, in addition to satisfying regulatory demands for improved operational resilience鈥�.
Elsewhere, LEI Worldwide are set on navigating the fundamental shift being brought on by DLT and central bank digital currencies. Darragh Hayes, director, LEI Worldwide, explains: 鈥淥ur wish is that actors throughout the international financial system start to understand how Decentralised Finance solutions based on blockchain protocols are set to fundamentally disrupt the industry. The legal entity identifier is a critical part of that puzzle.鈥�
Globalisation
Outside of Europe, regulation has also significantly changed in Asia, where China loosened its Qualified Foreign Institutional Investor (QFII) scheme, a programme that allows specified licenced international investors to participate in mainland China鈥檚 stock exchanges. The QFII programme allows foreign institutional investors to buy and sell yuan-denominated A shares of Chinese companies.
In this vein, eSecLending is looking to real advances during 2021 in the opening of a number of new securities lending markets for offshore participants, including the development of a clear roadmap for the lending of China 鈥楢鈥� shares.
Simon Lee, managing director, business development, Europe, the Middle East and Africa, and Asia Pacific at eSecLending, says: 鈥淓ntering any new lending market is always exciting, and for early adopters like eSecLending, opening a new market for our clients can provide material revenue upside for their lending activities, as well it can open up lending opportunities for new clients with investment portfolios focused in emerging and frontier markets that may have not previously participated in lending programmes.鈥�
Regulatory changes
In the wake of the 麻豆传媒 Financing Transactions Regulation (SFTR) and other frameworks, not to mention Brexit adapting to a new reporting environment is, unsurprisingly, a priority for firms as we approach 2021.
Val Wotton, managing director of product development and strategy, repository and derivatives services at DTCC saat that adapting to a new reporting environment following the end of the UK鈥檚 transition period, where firms will have dual SFTR, EMIR and MiFIR reporting obligations in the UK and EU, is a priority for firms in 2021.
鈥淭hese new reporting obligations will likely require enhancements to reporting infrastructure and other improvements to post-trade processes,鈥� he explains. 鈥淲orking in collaboration with other firms and with experienced service providers will help to ensure that organisations can achieve compliance with greater ease and certainty.鈥�
Matt Johnson, associate director, ITP product management at DTCC, adds that, in order to be ready for the February 2022 implementation SDR deadline, market participants need to have already conducted an analysis of their post trade processes in order to expose any weaknesses, allowing sufficient time for them to be addressed.
He continues: 鈥淔or those firms who intend working with an external provider to increase post trade efficiency, the selection process for this needs to have been completed by the end of March 2021, to provide ample time for onboarding and for testing to start in June, just over six months prior to SDR implementation.鈥�
In addition, with just one year remaining before the Central 麻豆传媒 Depositories Regulation鈥檚 settlement discipline regime (SRD) enters into force, maybe, DTCC says firms must focus on improving settlement efficiency in order to avoid the cost of penalties for trades which fail to settle on time and firms should identify and address any weaknesses in their post-trade processes.
Those who plan to work with an external provider to increase post-trade efficiency should make their selection by March 2021, in order to have ample time for onboarding and testing, well before the February 2022 SDR deadline.
Sharegain鈥檚 Yaari, believes that 鈥�2020 may have been the start of a new decade, but the industry鈥檚 focus hasn鈥檛 moved on from the 2010s: SFTR, CSDR, Markets in Financial Instruments Directive (MiFID) II, Brexit have continued to suck the air out of the room鈥�.
With the fourth phase of SFTR regulation coming into effect in January for the EU but not the UK, firms such as UnaVista and Caceis are looking for the market to keep up its focus on being ready for those final deadlines.
Catherine Talks, SFTR product manager at UnaVista, says: 鈥淲e have seen some issues that have required working through, such as ensuring EU branches of non-EU entities are accurately reflected in counterparty reports. Non-financial parties located in the UK are not reportable under the UK regulation, however if they have a branch in the EU then that would be reportable under the EU regulation鈥�.
Dan Copin, head of equity finance at Cacies, also hopes that markets will manage to sufficiently optimise their trading strategies to better handle the complex reporting workflows that SFTR requires - for CSDR, implementation is just not going to be easy for anybody. Both firms stress the importance of continuing the strong engagement across the market to ensure a smooth go-live.
Ronen Kertis, CEO of Cappitech, says: 鈥淪FTR transaction reporting is complex and as the year progresses, the initial teething problems from the first phase of SFTR implementation will also need to be ironed out. To add insult to injury, firms will be managing this while faced with limited budgets thanks to the worldwide pandemic, as well as greater reporting demands coming from further updates to many existing regulations and the introduction of new reporting regimes.鈥�
Darren Crowther, general manager, securities finance and collateral management of Broadridge, also comments that the industry would benefit from final clarity and agreement on how partial settlements workflows will impact the downstream market utilities and SFTR report.
Deutsche Bank鈥檚 Leo suggests that the CDM has the potential to 鈥渟ubstantively transform the manner in which we negotiate and manage documentation and transactions in the future. The standardisation features and industry collaboration that underpinned the delivery of SFTR will support the continued advancement of CDM in our industry.鈥�
Moving away from the headline act of SFTR, Leo adds that series five of Uncleared Margin Rules (UMR) is highly anticipated. The plot thickens, as institutional investors have to manage the competing affections of securities lending, repo and collateralisation requirements. It will be a busy finale but we expect a happy ending as institutional investors gravitate towards outsourced trading solutions offered by agents such as Deutsche Bank鈥�.鈥�
Elsewhere, the Alternative Reference Rates Committee (ARRC), says 2020 ended strongly as US and UK regulators, and LIBOR鈥檚 administrator, made a series of announcements which collectively proposed an endgame for the US dollar LIBOR.
The ARRC is a group of private-market participants convened by the US Federal Reserve Board and the New York Fed to help ensure a successful transition from US dollar, and the London Interbank Offered Rate (LIBOR) to a more robust reference rate,
Significantly, the committee notes that part of this rate transition endgame was supervisory guidance encouraging banks not to enter new LIBOR contracts after 2021.
Tom Wipf, vice chairman of institutional securities at Morgan Stanley and chairman of the ARRC, explains: 鈥淭his endorsement of ARRC鈥檚 position has made our wishlist for 2021 shorter, but at the top of it remains the need for a legislative solution for 鈥渢ough legacy鈥� contracts. A legislative solution in 2021 would mark a major milestone in the transition away from LIBOR.鈥�
ESG
Many if not all agent lenders identify ESG as an important area that needs to evolve within their securities lending programmes to help asset owners better understand their options in this arena. In early October a survey of 44 leading institutional investors revealed that almost all respondents believed that securities lending activities can coexist with ESG principles, according to the Risk Management Association (RMA).
ESG regulations will start to take effect in 2021 with the Sustainable Finance Disclosure Regulation (SFDR) commencing in the EU, requiring asset managers to categorise and disclose their funds according to climate and wider environmental criteria. Regulators are also consulting on ESG in Hong Kong and Singapore.
Sebastien Danloy, global head of asset owners and managers, markets and securities services at HSBC, says: 鈥淚n 2020 ESG investing went from niche to norm with greater inflows and much interest from our clients. We have launched an ESG portfolio reporting product which offers a choice of leading ESG data providers, so that the differing results can be easily compared, to provide meaningful insights for our clients until quantitative ESG data becomes available.鈥�
Mark Snowdon, head of capital markets, Asia Pacific, for Northern Trust, says: 鈥渟ecurities lending is no longer a standalone product. In 2021, we expect securities finance will become a key driver of asset owner/manager decisions around the appointment of asset servicing providers. Northern Trust is committed to delivering a holistic solution allowing its clients to optimise their investments across the value chain and for a wide range of purposes.鈥�
Scott Brown, director of business development at Pirum, concludes: 鈥淓arly 2021 will not be materially different to 2020. I cross my fingers for the adoption and impact of the various COVID-19 vaccinations, as this will be definitive in boosting the global economy. The securities finance market will still see many firms with personnel working from home full-time to the end of Q1.
鈥淲ithout commuters and travel, oil prices will not reach pre-COVID levels and ESG will remain a key focus for the industry and become more intrinsic to the practice of firms transacting SFTs. With the latter phases of UMR and CSDR coming in the next two years, the adage remains; 鈥淎n ounce of prevention is worth a pound of cure.鈥�
Conclusion
With Brexit in the rearview mirror, regulatory change headed our way and technology looking to speed up and efficiently change the way we work within securities finance, 2021 is looking like more than just a silver lining around the dark cloud that has been 2020. As David Raccat, co-founder and head of EMEA at WeMatch, puts it: 鈥淭he industry is clearly at a turning point, it is more receptive to change and the pace will accelerate once the sanitary crisis is behind us for good. The journey towards more transparency is only at its beginning and electronification of the business will help to provide more accurate information to all categories of players.鈥� Raccat believes transparency will accompany the industry into its digital journey and it has never been so exciting and the perspectives are extremely encouraging.
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