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Securities Finance Symposium: Automation and Clearing Insights

Writer's picture: Emil GasparyanEmil Gasparyan

The Securities Finance Symposium, held in Westminster, brought together industry leaders to discuss pressing issues in the securities finance market, including automation, regulatory changes, and the future of collateral management. Key discussions highlighted the impact of upcoming elections on regulations and the necessity for automation in adapting to a shorter settlement cycle.

Key Takeaways

  • The upcoming US and European elections are expected to significantly influence financial regulations.

  • Automation is crucial for a smooth transition to a T+1 settlement cycle.

  • Collateral tokenization is seen as a key driver for efficiency in securities finance.

  • The US Treasury clearing mandate will increase operational burdens for firms.

Regulatory Changes and Market Sentiment

The symposium opened with discussions on the regulatory landscape, particularly in light of the 2024 elections in the US and Europe. Farrah Mahmood from ISLA emphasized the potential shifts in financial services legislation, particularly regarding the Basel III proposals and the implications of a new Labour government in the UK.

Key themes identified included:

  • Financial stability and the rollout of Basel III rules.

  • Investor protection and increased retail participation in capital markets.

  • The impact of digital innovations and the rise of digital assets.

The Role of Automation in T+1 Transition

A panel discussion focused on the importance of automation in transitioning to a T+1 settlement cycle, which is expected to be implemented by the end of 2027. Industry experts shared insights from North America's successful shift in May 2024, highlighting the need for regulatory backing and improved market behavior.

Key points included:

  1. The necessity for firms to adapt their operating models to enhance automation.

  2. The importance of standardization to reduce friction in market operations.

  3. The challenges of automating processes like recalls, which have traditionally relied on manual methods.

Collateral Management and Tokenization

The symposium also addressed the evolving landscape of collateral management, with a focus on tokenization. Panelists discussed how technology could streamline collateral processes and enhance liquidity without the need for physical asset movement.

Key insights included:

  • The need for interoperability between traditional and tokenized assets.

  • The potential for triparty agents to facilitate the adoption of tokenized assets.

  • The importance of industry collaboration to achieve widespread adoption of new technologies.

Operational Burdens from US Treasury Clearing Mandate

The final panel highlighted the operational challenges posed by the US Treasury clearing mandate, which is expected to significantly increase trade volumes and data exchange requirements. With daily volumes projected to rise from $7.5 trillion to $11 trillion, firms must prepare for the associated operational burdens.

Key considerations for firms include:

  • Developing robust technological infrastructure to handle increased volumes.

  • Understanding the implications of mandatory clearing on domestic and international transactions.

  • Preparing for upcoming deadlines related to the new regulations.

Looking Ahead: The Future of Securities Finance

As the symposium concluded, industry experts reflected on the future of securities finance, emphasizing the need for incremental improvements rather than sweeping changes. The consensus was that while technology offers significant opportunities, firms must first address internal inefficiencies and legacy systems to fully leverage new innovations.

In summary, the Securities Finance Symposium provided valuable insights into the current state and future direction of the securities finance industry, highlighting the critical role of automation and regulatory adaptation in navigating upcoming challenges.

Sources

  • Securities Finance Symposium: From automation to clearing - Securities Finance Times, Securities Finance Times.

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