David Field | published on 30th January 2018
Regulatory impact on Securities Finance
It’s not just about SFTR!
Change continues to affect the financial services industry. MIFID 2 has gone live, and whilst there is still some embedding to do, there will be far reaching impacts around trading, research costs and quality, operations and reporting obligations. We’ve also seen far reaching impacts on derivatives from regulations around clearing, collateral and counterparty classification, along with extensive legal re-papering.
Now it’s the turn of Securities Finance, where SFTR is on everyone’s mind, but EMIR, Basel 3, MIFID 2 etc all impact the industry in ways which are complex and over-lapping, as illustrated. Plus there are numerous “soft regulations” in the form of best practice guidelines from the trade associations and the Bank of England.
The expectation is that increasing transparency, best execution and capital constraints will lead to more trading on venues, with firms looking to decrease capital consumption through enhanced disclosure at the point of trade and alternative collateral transfer mechanisms – legal structures or via central counterparts.
Multiple over-lapping regulations have added complexity and cost to firms’ operating models, and as the dust settles, the impacts on the industry are starting to become apparent. Market participants must seek opportunities for operational and capital efficiency – particularly through automation and standardisation, zero touch and by breaking down silos to drive out cost savings.
The Securities Finance industry is likely to be very different in 5 years’ time – and whether consequences are intended or not, firms should develop strategies to prepare for the challenges and opportunities ahead.
Contact us at The Field Effect to see how we can help you prepare your business.