The securities finance industry is taking huge steps forward with technology, experts claim, although there remains no magic bullet to solve the industry’s conundrums.
Multiple vendors operating in the space continue to build and refine solutions for what is a notoriously fragmented market with complex, bilateral trades.
Post trade processing, electronic trading, central clearing and data services are key areas of focus for fintech players – as well as regulatory compliance.
Pirum, 4Sight (now part of Broadridge), FIS, EquiLend, IHS Markit, Stonewain Systems and Trading Apps are some of the key vendors.
Leading figures discussed the progress and next steps for stock loan and repo technology in Seoul this week at the PASLA/RMA event.
“Technology providers in the securities finance market are actually now at the forefront of big data management,” said Pierre Khemdoudi, managing director, IHS Markit.
“The industry is making a quantum leap in technological advancement after arguably lagging behind over the last 10 years.
"Fortunately for securities finance participants, the industry is now at more advanced stage which is particularly important given the introduction of new regulations and reporting regimes, such as SFTR.”
Pirum's Ben Challice agreed that the industry has made significant advancements in terms of bringing efficiency, liquidity and transparency to the industry.
He added that the need for greater automation in the securities finance process will only increase as the industry evolves from the classic OTC model.
Pirum recently teamed up with IHS Markit to build an SFTR solution offering a fully hosted, end-to-end service to help customers meet reporting requirements.
More than 30% of attendees at the Seoul conference voted that regulation was a key driver behind their technology investment - 29% said business growth.
"While regulation and business growth don’t always go hand-in-hand, technology is playing an important role to bridge product and regional gaps and integrate the market," said Andrew McCardle, director, EquiLend Asia, Hong Kong.
Madalin Prout, vice president, head of relationship management at FIS, added: "When it comes to securities finance technology, the ultimate purpose is to increase efficiency. This can be though connectivity and integration across the participants’ systems, providing an enterprise level view across jurisdictions, products, currencies and asset classes."
Last month, an Aite Group report suggested a more streamlined electronic infrastructure providing interoperability across regions needs to be built in order for the securities lending market to grow.
Aite's analysts concluded that regulatory change will have the biggest impact on securities lending activity and "will not abate."