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Securities finance rules come to head

06 February 2014


Market welcomes clarity on future regulations but there are still many unknowns around their impact on securities lending

The securities lending industry is finally getting to a point where a lot of rules that have been up in the air for the past couple of years are starting to be finalised, panellists discussed at the IMN beneficial owners' international securities lending conference, in Austin, Texas.

Judy Polzer, head of securities lending product, JPMorgan, said: "[Market participants] may not be thrilled by the rules but at least they know what they are and can really devote time to figuring out how to create new products and keep the market going. Hopefully we will be able to move on." She added that financial markets are "very adaptive".

Among other regulations, panellists discussed the new US money market fund (MMF) rules, which are expected to be finalised by the US Securities and Exchange Commission (SEC) later this year.

Kevin Bannerton, head of Americas liquidity management, Deutsche Bank, said that following previous conversations with regulators, there is room for modifications between the proposals and final rules, for example the widening of retail exemption.

Scott Olson, senior managing director and head of global product development, regulatory affairs and product tax, State Street Global Markets, pointed out that the Financial Stability and Oversight Council (FSOC) mentioned in the original MMF reform proposals that the rules could apply to other vehicles beyond 2A7 funds.

Olson said the rules could be extended to cover all cash collateral pools, group trusts, and common trust funds, which would be of "extreme concern".

Bannerton agreed, saying it is "only a matter of time before the pools are brought under the rules too".


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