他们准备如何应对? Based on my numerous conversations with hedge funds, asset managers and other 买方公司, we should expect another year of heavily scrutinized budgets, difficult resource allocation decisions and additional staffing costs, as well as the need to implement new reporting systems and make technology upgrades.
In 2020, there are three key pieces of regulation running in parallel which will impact buy-side clients – the Uncleared Margin Rules (UMR), along with key provisions of the Securities Financing Transaction Regulation (SFTR) and the 结算 Discipline Regime (SDR) of the Central Securities Depositories Regulation.
UMR将影响全球的公司. SFTR和SDR, 虽然起源于欧洲, will affect any company with transactions executed and settled in a central securities depository in Europe. 同时, financial institutions are also feverishly readying for the Libor transition and Brexit adjustments. Needless to say, it’s going to be an intense period of change for the financial sector.
This regulatory tsunami is challenging traditional buy-side operating models and introducing new costs and regulatory reporting requirements. 例如, UMR的波5和波6, 将于2020年和2021年生效, 分别, will predominantly impact funds and institutional investors, requiring some 买方公司 to acquire new skills and competencies in order to undertake functions which they’ve never performed before.
Many firms are expected to make securities lending a key element of their liquidity management strategies to offset the operational and funding costs of UMR. 然而, this will likely create a domino reaction because the reliance on securities lending will increase reporting obligations under SFTR and could have an adverse effect as firms look to mitigate settlement risk under CSDR. This illustrates the compounding impact of multiple regulations and serves as a reminder of the dangers of unintended consequences.
The implementation timeline of these regulations creates other challenges for the buy-side as they start preparing for compliance. With the forthcoming implementation of SDR, 买方公司 have to undertake an analysis of the cause of their failed trades as financial penalties will be incurred should a trade fail to settle under the mandated T+2 timeframe. 不仅如此, failed trades will also lead to a possible buy-in process, which will have resource and cost implications.
对于SFTR, while the implementation date for the buy-side is Q3 2020, certain information such as legal entity identifiers and unique trade identifiers may be required by their dealer counterparties before reporting obligations are phased in. This means that some institutions may need to be ready for a ‘soft’ go-live date ahead of the official deadline to ensure information requirements can be met.
在这样的背景下, 买方公司, which are already grappling with intense cost-cutting pressure and tight operating margins, now find themselves in the difficult position of having to upgrade in-house systems or perform major overhauls of out-of-date platforms to comply with these and other regulatory mandates while still growing their client-service capacity. 越来越多地, many 买方公司 are looking to outsource some of these functions to third parties to avoid the investment needed to modernize their in-house infrastructure.
最近, a client told me that with regulation moving so quickly, it’s more cost-effective to have a vendor take on the responsibility of implementing ongoing technology revisions. 在他看来, a service provider has the subject-matter expertise and capacity to monitor ongoing developments in the regulatory environment, 比如时间表修订, expansion of scope and extension to new jurisdictions. We can expect to see this trend to gain steam in the coming years.
Given that regulation shows no signs of slowing down, the buy-side will need to continue preparing to comply with these new rules amidst a diverse set of ongoing business pressures. This creates opportunity for external service providers to tackle these challenges head-on so firms can focus on growing their business and meeting the needs of their clients.
This article first appeared in Global Investor/FOW on January 28.