What’s been the biggest focus for ISLA over the past 12 months?
Andrew Dyson: Inevitably, much of what we have done in the past 12 months has been regulatory-driven. We have devoted considerable resources to the Securities Financing Transactions Regulation (SFTR), working with both member firms and regulators to better understand how this important transparency regime will impact on our industry. Although SFTR has been the most prominent piece of regulatory work, the second Markets in Financial Instruments Directive (MIFiD II) and the rolling impact of Basel III have also been important.
Another key initiative has been the development of a market standard pledge agreement that will complement our existing global master securities lending agreement. As much of the regulation is now at the implementation phase, we see the development of a market standard pledge agreement as an important part of a renewed forward looking agenda for the International Securities Lending Association (ISLA).
There have been new hires at ISLA. How will this help the association to achieve its goals going forward?
Dyson: ISLA now has five permanent members of staff and two consultants. Although small when compared to similar associations, we have more capacity to support our members geographically and across multiple regulatory and product work streams. Our goal is simply to support the needs of our members, and we now have the foundations of a team to allow us to do that.
Can you outline some of the work that ISLA has been doing with regulators and other stakeholders recently?
Dyson: As we think about the future direction of the industry and the important part that ISLA can play in that future, we have been looking at a number of strategically important issues. We have already mentioned the development of our market standard pledge agreement, which will provide a standardised framework for this business. This is vitally important, as when regulators and policymakers look at our markets, they need to see how we are prepared to effectively self-regulate in this area.
We have also spent some considerable time with a small group of member firms to better understand how UCITS funds can more effectively engage in securities lending. We are well aware that certain restrictions placed on UCITS funds can severely restrict their ability to engage in lending and we have opened up discussions on these issues with both local regulators and policymakers in Brussels. In a world where asset management is increasingly reliant on index or exchange-traded fund management structures, lending can be an important alpha generator and, as such, we are keen for UCITS funds to remain competitive from a global investor perspective.
The third point that we would highlight is the work that we are doing with member firms on the overall structure of the market here in Europe. For various reasons, borrowers are looking for greater and more timely transparency and the imminent implementation of SFTR is seen as a catalyst for change.
There are a lot of regulatory deadlines still to come. What should your members be most aware of in the coming months?
Dyson: It is clear that many member firms are heavily engaged with the implementation of MIFiD II and with compliance required from 1 January 2018, we expect the pace to quicken during the remainder of the year. Once the European Commission has completed its review of the SFTR technical standards that were published by the European Securities and Markets Authority earlier this year, the focus will then switch to implementation during 2018.
This year’s conference has some great speakers and panels lined up. What are you looking forward to most?
Sejal Amin: In collaboration with this year’s co-chairs, we spent considerable time thinking about the topics that we wanted to focus on this year at the ISLA Securities Finance and Collateral Management Conference, and inviting new but relevant speakers to participate. We are particularly excited about the educational sessions on MIFiD II and the Bank of England Money Markets Code on the first day, which in addition to the traditional roundtable discussions, should provide delegates with a better understanding of some of the key regulations and topics that are front and centre for the industry.
While SFTR has been topical for some time, we have seen increasing interest from member firms to better understand the implications and application of MiFID II and best execution in the context of securities finance.