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Foreword

Dear Reader, and sponsorship tell us anything about the industry, the governance requirements that are enshrined within work to create a workable CDM framework, has only been
then the high level of delegate registrations and record this ethos. This demands that institutional investors driven by the regulatory imperative of SFTR. It is therefore
We are once again delighted to welcome you to the latest levels of sponsorship suggest that the industry is in rude have a policy around their governance as well as their vitally important in our view, that the industry does not
edition of the ISLA Securities Lending Market Report. health. However, the picture is probably not that clear cut. securities lending programmes. miss this once-in-a-lifetime opportunity to drive change
This is now the 11th edition of the report, which continues Anecdotal feedback at the conference combined with and reap the real benefits that SFTR could bring to us all.
to provide a platform for us all to better understand the recently published profitability and revenue figures for the Set against a backdrop of tightening revenues and
forces that are shaping our markets today, and the first six months of 2019, suggest revenues from securities the challenges presented by an increasingly complex We would like to take the opportunity of this Foreword
implications for market participants and other interested lending are down on levels seen in 2018. Statistics regulatory and business environment, the market has to to thank those who have contributed thought leadership
stakeholders alike. recently published by IHS Markit highlight a 15% fall in think more broadly about how it can use the structural pieces, each providing a unique perspective on an
revenues for the first six months of the year, compared to rigor created by SFTR and CSDR to leverage real important topic. The first of our three guest contributions
Since we published the last edition of the report in early the same period in 2018. The most pronounced falls were business benefits from these changes. Inevitably, the comes from Tadawul, who considers the development of
2019, we have seen something of a change of pace seen in respect of government bond lending, which fell market like many others is turning to technology to help the capital markets in Saudi Arabia. We should not forget
around several key legislative and business development some 24% during the first half of the year. We will explore solve these challenges. that that the Middle East and Saudi Arabia in particular are
initiatives that we for one are focused on here at ISLA. some of the reasons behind the apparent fee spread growing in prominence, and that the role that securities
Whilst we will discuss SFTR a little later, it is important compression in government bond markets later on in this Today, we are seeing real momentum behind the lending has to play in supporting market liquidity and
to recognise that the publication on 11 April 2019 of report, however it would appear that there was a fall-off in development of Common Domain Models (CDMs) facilitating investor access to these markets is key.
the Regulatory Technical Standards (RTS) for SFTR in the demand to borrow High Quality Liquid Assets (HQLA), and digital contracts, as firms look to standardise
the European Union’s Official Journal (OJ), set out a just as the European Central Bank’s (ECB)’s Quantitative technology platforms and create cross-product efficient Next, Credit Benchmark looks at the role of ratings in
clear implementation timeline for SFTR until Q2 2020 Easing (QE) stimulus program came to an end. documentation conduits. Increasingly, it makes sense the context of better managing and understanding
when the first reports are now due to be submitted. The for firms and markets to standardise taxonomy for the counterparty credit risk.
publication of the RTS in the OJ has created certainty Another factor that was discussed extensively in Madrid, various data points and component parts of a trade. This
where uncertainty existed up until now and has provided was the role of sustainable finance and ESG in the should be done on a consistent and cross market basis, Our final piece has been produced by MarketAxess on
a focal point for much of the industry over the coming six context of changing investor behavior more broadly and especially where those terms and life cycle events are SFTR, who explain why the industry needs to learn from
to twelve months. what this means for our markets. It was commented common to a number of markets and products. In terms past implementations of regulatory reporting, and start
by one of our panellists that Environmental, Social and of the appropriate owner or custodian of any CDM for our making earlier preparations for compliance.
Before we look at the further implications of what SFTR Governance (ESG) screening is now an integral part of markets, we would as you might expect, argue that this is
means for our industry, it is worth reflecting on some of the investment management decision making process, something that should be held by a neutral third party for As always, we would like to thank our data partners;
the other trends that have shaped our thinking in the and this has clear ramifications for our markets. As the benefit of all industry participants. Consequently, ISLA IHS Markit, DataLend, FIS Global, JP Morgan Tri-party,
first six months of this year. Looking back to our annual so-called millennials demand different things and new is investing time and resources to better understand how Euroclear, BNY Mellon Tri-Party, and Clearstream for their
conference in Madrid during June, we saw several criteria to judge ‘return’, securities lending must respond these technologies and frameworks can be developed valued data inputs.
consistent themes and broader messages that paint an to these changing dynamics. ESG driven funds can for the benefit of the broader community. We have to be
interesting picture of our markets today. If attendance present challenges around collateral acceptability and honest with ourselves and acknowledge that much of the ISLA Team

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