Finadium held its London repo event this past Thursday, and we thought it went very well – many thanks to the panelists and attendees. Below we offer final notes and a view of the introductory presentation.
The four panelists – Emma Mangan from J.P. Morgan, David Lewis from SunGard, Jason Van Praagh from Northcross Capital and Jonathan Cooper from Finadium – each took aim at some of the more vexing issues in repo today. While regulation hung like a low cloud over every topic, we made an effort to be specific in comments – we agreed that we all were suffering from FTT fatigue. Among the interesting points made were:
– Defining collateral reuse vs. rehypothecation. How these terms get defined, particularly across multiple regulatory agencies, will be an important area of focus over the next year.
– Regulators are putting out contradictory rules, and this is compounded by the fact that although they are collectively in the same club, many regulators do not in fact know each other. It is expected to take a long while for even major regulators to agree on a common and non-conflicting set of rules for repo, as well as collateral across product types.
– Exposure netting, both on and off balance sheet, is an area of great concern.
– The market expects greater conversations about CCPs in repo and securities lending, with different reasons for using CCPs across market participants and legal jurisdictions. This will not be a one size fits all model. (For more on this, see Finadium’s report from last week on securities lending CCPs featuring a discussion on why exposure netting is central to the conversation).
– Our thanks to David Hiscock from ICMA for offering an excellent footnote to the event – see the ICMA’s comment letter on exposure netting in the Leverage Ratio here.
For those unable to attend, please find a private slideshow of Finadium’s introductory presentation.