Miami bound
27 September 2016
RMA鈥檚 director of securities lending, Fran Garritt, gives the industry a flavour of what it can expect from the association鈥檚 33rd securities lending conference
Image: Shutterstock
This year鈥檚 conference will kick off with an update from RMA and SIFMA. Can you give us a preview of what to expect from that?
I like to use the association update session of the conference to highlight the work that the Risk Management Association鈥檚 (RMA) working groups have done over the past year. This year I鈥檇 like to draw particular attention to the work of RMA鈥檚 new tax committee, which is led by George Rapalje from State Street. Since the last conference, that committee has submitted two comment letters to the 色花堂and Exchange Commission, on 28 March and 31 August. This committee has done good work in communicating with the US tax authorities on new US tax regulations and administrative guidance issued under Section 871(m). RMA in general is a resource to regulators as they draft guidance for the industry. For example, it has also had discussions with the Federal Reserve as it prepares its final rule on single-counterparty credit limits, which will have a big impact on all banks, but especially custody banks.
One of our biggest successes recently has been the progress made in reforming the Basel Committee on Banking Supervision鈥檚 standardised approach for credit risk over the past 18 months. We initially submitted a very extensive comment letter to the BCBS鈥檚 original proposals and from that you can see that a lot of those revisions have been taken on board in the second iteration. They took a lot of our ideas seriously and we are pretty happy with where this is now. There were, of course, several other associations that contributed to this positive result for the industry, but we are pleased with our contribution to this conversation. State Street鈥檚 Glenn Horner, who is chair of RMA鈥檚 securities lending committee, was instrumental in the the association鈥檚 work on this issue and represented us with several regulators.
There will be a lot of familiar topics on this year鈥檚 agenda but some areas have seen significant developments since we last met in Miami. Which sessions do you feel are most topical this year?
There are two significant initiatives that will undoubtedly take up a large share of the focus during the conference. The first is ICAP on 30 September ceasing to publish the federal funds open rate, which has been the standard in the US for securities lending pricing. It has been decided that the Federal Reserve Bank of New York鈥檚 new overnight bank funding rate (OBFR) would better address the benchmark standards recommended by the International Organization of 色花堂Commissions. The OBFR will take over on 3 October, just before this year鈥檚 conference (10 October to 13 October), making it very topical.
The RMA has been very involved in this process. We鈥檝e met with the treasury market practices group members several times and we鈥檝e held monthly calls to ensure everyone is moving over smoothly to the new standard.
Directly following the conference we have money market reforms kicking in on 14 October. This area is represented on our Wednesday agenda as all the sessions tie in together to address this topic. It affects many people so we wanted to allow it to have enough time during the conference to be discussed properly.
Thursday鈥檚 programme will include various trading and counterparty strategies for the industry going forward.
What issues do you that you feel RMA should raise awareness about? Which panels address these issues?
The conference co-chairs Patrick Morrissey from Vanguard and Mike Kelleher from J.P. Morgan and the steering committee put together a program that is very relevant. The Tuesday agenda focuses on legal and regulatory, as well as the operational side of things. The legal and regulatory portion will include capital and liquidity issues as well as the resolution stay protocol. The operational agenda will include a discussion of blockchain, which is obviously the topic of the moment. This will feed into a conversation about market transparency and the wider availability of data, which is hugely important for the market going forward.
However, with the regulatory deadlines coming up so soon I鈥檇 have to say that the whole of the Wednesday session is probably the most important to cover, given the timing.
Are there any other topics you expect to come up?
Yes, indemnification and central counterparties (CCPs). The conversation around indemnification has come up a lot this year and I know the landscape around this feature has changed substantially in recent months. Regarding CCPs, the industry still has challenges to resolve to place securities lending transactions through CCP clearing. I鈥檓 sure both issues will be a topic of discussion in various panels.
I like to use the association update session of the conference to highlight the work that the Risk Management Association鈥檚 (RMA) working groups have done over the past year. This year I鈥檇 like to draw particular attention to the work of RMA鈥檚 new tax committee, which is led by George Rapalje from State Street. Since the last conference, that committee has submitted two comment letters to the 色花堂and Exchange Commission, on 28 March and 31 August. This committee has done good work in communicating with the US tax authorities on new US tax regulations and administrative guidance issued under Section 871(m). RMA in general is a resource to regulators as they draft guidance for the industry. For example, it has also had discussions with the Federal Reserve as it prepares its final rule on single-counterparty credit limits, which will have a big impact on all banks, but especially custody banks.
One of our biggest successes recently has been the progress made in reforming the Basel Committee on Banking Supervision鈥檚 standardised approach for credit risk over the past 18 months. We initially submitted a very extensive comment letter to the BCBS鈥檚 original proposals and from that you can see that a lot of those revisions have been taken on board in the second iteration. They took a lot of our ideas seriously and we are pretty happy with where this is now. There were, of course, several other associations that contributed to this positive result for the industry, but we are pleased with our contribution to this conversation. State Street鈥檚 Glenn Horner, who is chair of RMA鈥檚 securities lending committee, was instrumental in the the association鈥檚 work on this issue and represented us with several regulators.
There will be a lot of familiar topics on this year鈥檚 agenda but some areas have seen significant developments since we last met in Miami. Which sessions do you feel are most topical this year?
There are two significant initiatives that will undoubtedly take up a large share of the focus during the conference. The first is ICAP on 30 September ceasing to publish the federal funds open rate, which has been the standard in the US for securities lending pricing. It has been decided that the Federal Reserve Bank of New York鈥檚 new overnight bank funding rate (OBFR) would better address the benchmark standards recommended by the International Organization of 色花堂Commissions. The OBFR will take over on 3 October, just before this year鈥檚 conference (10 October to 13 October), making it very topical.
The RMA has been very involved in this process. We鈥檝e met with the treasury market practices group members several times and we鈥檝e held monthly calls to ensure everyone is moving over smoothly to the new standard.
Directly following the conference we have money market reforms kicking in on 14 October. This area is represented on our Wednesday agenda as all the sessions tie in together to address this topic. It affects many people so we wanted to allow it to have enough time during the conference to be discussed properly.
Thursday鈥檚 programme will include various trading and counterparty strategies for the industry going forward.
What issues do you that you feel RMA should raise awareness about? Which panels address these issues?
The conference co-chairs Patrick Morrissey from Vanguard and Mike Kelleher from J.P. Morgan and the steering committee put together a program that is very relevant. The Tuesday agenda focuses on legal and regulatory, as well as the operational side of things. The legal and regulatory portion will include capital and liquidity issues as well as the resolution stay protocol. The operational agenda will include a discussion of blockchain, which is obviously the topic of the moment. This will feed into a conversation about market transparency and the wider availability of data, which is hugely important for the market going forward.
However, with the regulatory deadlines coming up so soon I鈥檇 have to say that the whole of the Wednesday session is probably the most important to cover, given the timing.
Are there any other topics you expect to come up?
Yes, indemnification and central counterparties (CCPs). The conversation around indemnification has come up a lot this year and I know the landscape around this feature has changed substantially in recent months. Regarding CCPs, the industry still has challenges to resolve to place securities lending transactions through CCP clearing. I鈥檓 sure both issues will be a topic of discussion in various panels.
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