We are pleased to report on a very successful Finadium annual conference yesterday in New York. With no transit strikes or bad weather in the way, nearly every one of our 120 registrants attended. The panels moved quickly and we ran out of time for several of them, showing how much information market participants would still like on a variety of topics. Here are our main takeaways and a copy of our presentation slides.
The main themes of the day:
1) A broadening of interest in securities finance and collateral. The participants have always been there at hedge funds, buy-side firms and others, but we now see executives recognizing they need to pay attention more closely than ever before. This has translated into a growth of readership for Securities Finance Monitor and in Finadium’s Executive Briefing subscription service.
2) Firms are investing in technology to enhance efficiencies first and cut costs second. Firms are more willing to “take some risk” in their technology decision making so as not to be left behind. We find that the winners are more likely to focus on generating efficiencies first and cut costs second. Firms focused only on cost cutting are more likely to lose out on new business opportunities. Panelists from technology companies thought that the future looked more quantitative than today, with new skills needed for financing and collateral desks. They also thought that technology was there to serve people, not the other way around, and there would always be a need for smart people to run the business.
3) An increased use of OTC derivatives over physical financing transactions was seen as not an overall or deliberate market move, but rather a function of firm structure and finding the best tool in the toolkit for meeting client needs. Along the way, this has resulted in a sharp increase in synthetic financing over physical financing. We argue that regulators have accidentally preferenced the market in this direction.
4) Panelists thought that the outlook in 2016 and 2017 for the buy-side in securities finance was mostly good. CCPs are actively moving to accept the buy-side across repo, securities lending and OTC derivatives. Direct repo is now at least 10% of the market, according to one panelist. That’s a US$200 billion direct repo market!
5) We had an excellent panel featuring reporters from Bloomberg, the Financial Times and the Wall Street Journal on how securities finance is covered in the press. Panelists discussed how the industry could help them report better on financing topics, in turn making the subject more transparent. The implication was that this, in turn, could potentially help make public opinion more positive towards financing.
6) Our blockchain panel highlighted some really important similarities and differences in thinking by vendors in this space. Patrick Byrne shared his vision in a great presentation, Digital Asset Holdings highlighted their open ledger ideas, and itBit discussed their view of the blockchain within a Trust Company.
We are very appreciative to the panelists and attendees who made this event a great success. We look forward to seeing you at the next one.
Our conference slides are below.
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