FISL Preview: building out securities finance technology for long-term success

Ahead of Finadium’s Investors in Securities Lending conference (FISL), we speak with our panelist experts from Fidelity and RBC about the most important investments in securities lending today towards building out the securities finance technology for tomorrow.

In securities lending, automated trading has increased significantly, in turn boosting scale and improving lifecycle management, said Yuri Brightly, senior vice president and head of Securities Finance Platform at Fidelity.

Automated trading is improving trade details and therefore settlement, which is important for the Central Securities Depositories Regulation (CSDR) and Securities Financing Transactions Regulation (SFTR), he added: “[These regulations] required a lot more information, intraday matching, etc, which also promotes data transparency, achievable via improved system-to-system capabilities.”

Looking to the future, he believes investment is best focused on differentiated solutions at scale and real-time automation in addition to platform stability. At Fidelity, investment has been made in straight-through processing and real-time, non-batch-based settlement infrastructure as well as extending the PB Optimize platform, originally intended for hedge funds, to beneficial owners.

But investment, he noted, is not just about the funding resources, rather an overall strategy that includes a combination of the right kind of expertise and external development: “Nothing is getting slower in almost any industry, and so to continue to be able to operate with the highest levels of service, there needs to be a commitment to continued investment.”

Moreover, the looming shift to T+1 settlement in the US and Canada will further differentiate and reward the firms who have significantly invested in technology, Brightly added.

T+1 mover advantage

T+1 settlement is going to be a major challenge for a lot of firms, said Peter Abric, head of Securities Lending for RBC Capital Markets in New York: “The firms that have spent their resources getting that real time data well ahead of this are going to be farther ahead. Firms that are relying on sources that have not been real time historically (and) trying to find a solution for that is going to create a drain on resources.”

Abric expects to see a pullback of liquidity as the industry seeks to manage processes, which could include higher buffers held at agent lenders that could filter down to borrowing availability, and potentially pricing.

So far, the RBC team is seeing a lack of interoperability between providers for recalls, he said: “Vendors are working on solving that, except you need data from your back-end system, and the people that have their own books and records platform are going to come out further ahead until we can solve for this.”

Abric believes there is a significant discrepancy between what firms are using now and what they are going to need in a year: “We are the first line of defense in certain aspects of the business…We have to invest and make our processes better so we can let technology manage issues where it’s appropriate and let the trading desk manage the business itself and focus on servicing customers, revenue generation and all the other metrics that go into making a successful securities finance business.”

Peter and Yuri will be joined on the panel “Building out securities finance technology for long-term success” by colleagues from EquiLend, GLMX, and S&P Global Market Intelligence, which takes place in New York City from May 17 to May 18. It is our 7th annual conference bringing together a broad cross-section of the industry to share expert insights and is free for qualified buy-side firms including asset owners, asset managers, insurance firms and hedge funds. Register here.

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