09 March 2017
Seoul
Reporter: Drew Nicol
Asia may have to stay another day
Beneficial owners across Asia must come to terms with stay protocols in the near future if they want to do business in foreign markets, according to panellists at the Pan Asian Securities Lending Association/Risk Management Association’s conference in Seoul.

A stay protocol is a standard form that promises a globally systemically important bank (G-SIB) will, in the event of a default, freeze all relevant assets for a short time in order to avoid exacerbating market stress through a rush to reclaim collateral.

The protocol is signed on a voluntary basis by participants in a few jurisdictions, but any entities wishing to access those markets for securities finance are also required to sign.

One legal expert at the conference in South Korea explained that the issue for lenders that are expected to adhere to these rules is that, in the case of a default of a major investment bank, the counterparty is forced to hold on to collateral whose value might be crashing.

The potential for lenders to take on losses as a result of a stay protocol has led some legal teams that are new to the requirement to attempt to negotiate the terms, or even to advise against signing.

The relative lack of G-SIBS in Asia means that local securities finance participants have so far operated without the use of stay protocols, but that time is nearly over, according panellists.

Currently, only the UK, Switzerland, Germany and Japan have finalised their stay protocol regulations, but the US is expected to catch up in the first half of this year. The EU passed rules requiring member states to publish legislation as of 1 January 2016, but progress still varies from state to state.

The fact that the stay is voluntary puts the onus for education on these rules on the G-SIBs, which are expected to outline the requirements to their counterparties in jurisdictions that may not have equivalent rules, but that are expected to agree to them to have access to markets that do.

Conference panellists advised attendees to seek legal advice on how to approach incorporating stay protocols in order to remain open for trading in these markets.

More news
The latest news from Securities Lending Times
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Raccat launches securities finance dealership platform
25 May 2017 | London | Reporter: Drew Nicol
BNP Paribas’s David Raccat has decided to go it alone with the launch of Wematch.SecuritiesFinancing, a web-based tool aiming at disrupting the dealing process of securities financing markets
Northern Trust expands UAE operations
24 May 2017 | Abu Dhabi | Reporter: Stephanie Palmer
Northern Trust has opened a new branch office in Abu Dhabi, as part of a continuing focus on business in the UAE
R3 raises record funds for DLT development
24 May 2017 | London | Reporter: Stephanie Palmer
The R3 group has raised $107 million in two tranches of fundraising, securing the largest ever investment in distributed ledger technology to date
Faber joins Actualize Consulting as collateral chief
24 May 2017 | New York | Reporter: Drew Nicol
Actualize Consulting has brought on Mark Faber as managing director of collateral management services
EquiLend hires Hollyoake for post-trade team
23 May 2017 | London | Reporter: Drew Nicol
EquiLend has secured Emily Hollyoake as a post-trade product specialist
Lacklustre T2S take up drives volume drop-off
23 May 2017 | Frankfurt | Reporter: Drew Nicol
Clearstream warns of T2S’s failure to galvanise the market as its monthly volume slips 13 percent for April
IHS Markit signs Day for SFTR team
22 May 2017 | London | Reporter: Drew Nicol
IHS Markit has welcomed Stuart Day to its Securities Financing Transactions Regulation team