Betting on a trade repository in securities lending and repo

While nothing is certain in global financial regulations, the odds are getting better that European and US regulators will both ask the industry for a trade repository in securities lending. We suspect that this will not hamper business activities much if at all and will actually help in many ways.

The latest news to move towards a trade repository comes from Sharon Bowles, chairwoman of the European Parliament’s Economic and Monetary Affairs Committee, who is in support of greater disclosure on collateral for covered bonds and repo. Bloomberg had a good story on this today. While most of this is negotiations around the EU’s Capital Requirements Directive IV (CRD-IV), the article also mentioned Ms. Bowles support for a trade repository in securities lending and repo.

Changing gears now to Shadow Banking, Finadium’s recent report on the topic noted that a trade repository was on the Financial Stability Board’s Shadow Banking radar. David Rule, head of the FSB’s securities lending and repo working group, is also head of a UK Financial Services Authority Department. Possibly Mr. Rule and Ms. Bowles met recently and exchanged notes.

And heading to the US, the Federal Reserve’s working paper from December 2011 talked about the nuts and bolts of effective monitoring in securities lending and repo. A trade repository with effective reporting and analysis would be a likely idea to solve many of their concerns at once. Securities Finance Monitor wrote an analysis of this Fed paper when it was first released.

So, our bet is to prepare for a trade repository. Nearly all securities lending and repo are already feeding their trades into data systems of one sort or another anyhow, so feeding one more should not be a burden. Clients will like the fact that there is more oversight in general, and little will be given away that isn’t commonly known within the industry anyhow.

The next question is to ask who the likely candidates are to run the infrastructure and provide the analysis that regulators are certain to want. Could it be Equilend? SunGard? The new Markit/Data Explorers unit? The betting on whether a trade repository will be required is coming to a close; time to now to start betting on who will run it.

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