9 April 2021
Once again this year, Deloitte has held its conference focused on the challenges of the regulatory context in post-trading. On this occasion, Marta García, a Risk Advisory partner at Deloitte, emphasised in her keynote speech that the pandemic has postponed most of the goals and regulations relating to post-trading. 'The current sector scenario is similar to the one seen a year ago. New regulations will soon be introduced, which will have a technical and operational impact and will require very tight adaptation periods. New technologies will play a key role in all of this', she contextualised.
Meanwhile, Francisco Béjar, Deputy General Manager of Iberclear, highlighted throughout his presentation the importance of digitalisation and the promotion of new technologies in capital markets. To this end, he recalled that the European Commission published in September the Capital Markets Union action plan, which includes the recommendations of the High Level Forum, amongst which is the important role of technological innovation.
For Iberclear's Deputy General Manager, 'it is essential that we be prepared for regulatory changes'. To do this, he pointed out the importance of Iberclear's role as a CSD, to ensure this compliance by the entire Spanish market. To this end, he stated that the institution is expanding several tools and services to facilitate regulatory compliance. Finally, Béjar stressed that Iberclear's work as a CSD must be based on three pillars: ensure regulatory compliance, promote innovation and accompany institutions and issuers towards a more technological and efficient model.
For his part, David Galán, head of the Bank of Spain's Collateral Management Unit, focused his presentation on the impact of the ECMS (Eurosystem Collateral Management System) project on institutions. Galán pointed out that migration will occur in big-bang mode, and therefore, there will be no coexistence with current systems. Furthermore, the speaker was also eager to point out the change brought about by the use of ISO20022 messaging for marketable assets and XML messaging for non-marketable assets.
In his opinion, it is important for institutions to conduct a full impact analysis and implement a good project management plan to ensure their correct adaptation to the new system.
THE VISION OF CUSTODIANS AND DEPOSITARIES
When analysing the technological advances that are taking place within the sector, Almudena Amor, head of Financial Intermediaries and Corporations at BNP Paribas Securities Services, stressed that the industry has been engaged in process improvement and service creation for a long time.
In this regard, she highlighted the impacts that are already visible in the market, and which are geared towards the mechanisation of processes, using RPA or Machine Learning. This group would include new channels for communicating with customers, such as the development of APIs or the progressive implementation of virtual assistants. On the other hand, she believes that there are other impacts that will materialise in the longer term, such as the transformation of the post-trade environment through the use of Distributed Ledger Technology (DLT). Along this line, progress is being made in the development of value added services using Smartcontracts in the management of corporate events. However, she expects the introduction of digital assets to have the biggest impact. To achieve this, she believes that a clear regulatory framework must be in place.
Javier Planelles, Corporate Director of the Operational Services Division at CECABANK, agrees. According to Planelles, 'the key question is whether these technologies offer value. It is vital for the supervisor to provide a stable framework'.
For Elena Mesonero, Regional Manager of Business Solutions for Iberia and Latam at CACEIS, the most demanded products are concentrated in three areas: regulations (corporate governance or CSR), complex products and optimisation of data flows and processes.
Fernando García Rojo, Head of Sales of Global Securities Services at BBVA, believes that traditional custody and depositary services are the services likely to experience the greatest growth over the next few years, where the ability to provide customised solutions to different types of customers and their needs, specialised services for investment firms and their customers, and digital asset management, are becoming increasingly important.
With regard to the different regulations that are in place, such as the harmonisation of collateral (ECMS) and corporate events (SCoRE) at European level, García Rojo stresses the importance of the SCoRE project as a catalyst to ensure homogeneity in the management of corporate events at European level. On the other hand, he believes that the ECMS project provides participants with easier access to collateral, which in turn optimises collateral management.
As for the role of e-voting solutions in a possible standardisation of the European shareholder meeting market, Planelles is not optimistic as there is still a long way to go in each country. Although, he does see a positive point. 'There is a driver, which is CSR, based on wanting to exercise a responsible vote. In this area, custodians have a relevant role', he contextualises.
On the other hand, Mesonero again highlighted the disadvantage of the absence of a comprehensive regulatory framework for securities lending for Spanish collective investment institutions. This disadvantage affects both management firms, in terms of return, and the functioning of the securities market, in light of the entry of new regulations such as CSDR (February 2022).
Finally, Amor believes that the main challenge of implementing settlement rules for institutional customers is the complexity associated with the management of penalties and mandatory buy-back. Customers need to adapt to process, control and transfer penalties to their third parties when they are part of a chain of custody, which is usually the most common. Despite this difficulty, there is a clear consensus of the positive effects that its introduction will have on settlement efficiency.
However, with regard to the obligation to conduct a buy-back, there is a widespread view of the possible negative effects that this would have on market liquidity. For this reason, she stated that in the public consultation conducted by the European Commission in February, the industry again called for a delay in the implementation of the buy-back and for it to be voluntary.
