ISLA published a paper entitled ‘The Future of the Securities Lending Market | An Agenda for Change’ in September 2019, looking at the conjunction of market complexity, technical architecture and regulatory impacts. The conclusion reached was that a transformation was overdue and the solution would be underpinned by common standards.

This theme was reinforced by the introduction of the CSDR regulation which initiated settlement fail penalties. Financial firms asked the question, how do we avoid settlement penalties? The answer, a more efficient marketplace.

Over recent years the market has not improved as we all hoped and now the regulators are back on the case, driven by the impending move to T+1  in the U.S. and the need to make markets in Europe work ever more effectively.

The solution remains unchanged, adoption of technology which of course requires adherence to standards so anything built can operate correctly. For ISLA, CDM is the encoding of Best Practices and the mandate, priority and driver of what we do is directed by ISLA members through our board and working groups.

Many firms have told me that DLT is the “inevitable” solution to many of the challenges we have been discussing for years. Unsurprisingly it also solves many challenges around transparency for the regulatory community too and the marriage of CDM and DLT are perfect match in standardising the content of a DLT.

If you are in New York on November 1st, you can meet various trade associations to discuss the above at the Open Source in Finance Forum. Register here. If you are in Europe, join us at the ISLA AGM & 13th Annual Post Trade Conference where all the above will discussed in detail.

Author: Adrian Dale, Head of Regulation & Markets, ISLA

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