International Capital Market Association ICMA
ICM ICMA ERCC CC Opera ratio ions Se Semin inar r 2016: : Future challenges in the management of securities financing transactions – discovery & delivery 10 10 Febr February 2016 2016
ICMA ERCC Operations Seminar 2016 10 February 2016 Welcome by the Chairman of the ERCC Godfried De Vidts, Director of European Affairs, ICAP
ICMA ERCC Operations Seminar 2016 10 February 2016 Results from the latest European Repo Market Survey (published in Feb 2016) Richard Comotto, Senior Visiting Fellow, ICMA Centre
European Repo Council 30 th European repo market survey conducted in December 2015
30 th European repo market survey conducted in December 2015 Survey overview • outstanding value of contracts at close of business on Wednesday, 9 th December 2015 • 72 responses (+7)
30 th European repo market survey conducted in December 2015 Headline numbers • December 2015 EUR 5,608 billion • June 2015 EUR 5,612 billion • December 2014 EUR 5,500 billion • June 2014 EUR 5,782 billion • December 2014 EUR 5,499 billion • June 2013 EUR 6,076 billion • December 2012 EUR 5,611 billion • June 2012 EUR 5,647 billion • December 2011 EUR 6,204 billion • June 2011 EUR 6,124 billion • December 2010 EUR 5,908 billion • June 2010 EUR 6,979 billion • December 2009 EUR 5,582 billion
30 th European repo market survey conducted in December 2015 Comparable market growth • headline number -0.8% since June 2015 • for 65 respondents participating in last 3 surveys -1.4% since June 2015 +3.1% year-on-year
30 th European repo market survey conducted in December 2015 ICMA survey v FRBNY primary dealer reports Lehman LTRO Jun-08 Dec-09 USD 3,996bn
30 th European repo market survey conducted in December 2015 trading analysis Lehman LTRO
30 th European repo market survey conducted in December 2015 trading analysis
30 th European repo market survey conducted in December 2015 geographical analysis Lehman LTRO
30 th European repo market survey conducted in December 2015 collateral analysis --- core eurozone Lehman LTRO
30 th European repo market survey conducted in December 2015 collateral analysis --- peripheral eurozone Lehman LTRO
30 th European repo market survey conducted in December 2015 collateral analysis Lehman LTRO
30 th European repo market survey conducted in December 2015 maturity analysis short dates = 56.7% (60.2%)
30 th European repo market survey conducted in December 2015 maturity analysis
30 th European repo market survey conducted in December 2015 maturity analysis Lehman LTRO
30 th European repo market survey conducted in December 2015 product analysis lending 13.7% repo 86.3%
30 th European repo market survey conducted in December 2015 next survey Wednesday, 8 th June 2016
ICMA ERCC Operations Seminar 2016 10 February 2016 Update from the ERCC Operations Group: Working towards “joining the dots” Nicholas Hamilton, Executive Director, J.P. Morgan Chair of the ERCC Operations Group
ICMA ERCC Operations Seminar 2016 10 February 2016 Agenda 09.45 Welcome by the Chairman of the ERCC Godfried De Vidts, Director of European Affairs, ICAP 09.50 Results from the latest European Repo Market Survey (published in Feb 2016) Richard Comotto, ICMA Centre 10.00 Update from the ERCC Operations Group: Working towards “joining the dots” Nicholas Hamilton, Executive Director, J.P. Morgan (Chair of the ERCC Operations Group) 10.30 Regulatory update: Upcoming requirements in relation to SFTs David Hiscock, Senior Director, ICMA 10.45 Ongoing work on data requirements & reporting fields Jonathan Lee, EMEA FI Regulatory Reporting Manager, J.P. Morgan (Chair of the SFT Reporting Working Group) 11.00 Panel discussion: Continued evolution in securities financing markets – What’s next? Moderator: Adam Bate, Executive Director, Morgan Stanley (Co-Chair of the ERCC Operations Group) Gregg Bromberg, Managing Director, BRM, Morgan Stanley Godfried De Vidts, Director of European Affairs, ICAP Andrew Dyson, Chief Operating Officer, ISLA Olivier Grimonpont, Global Head of Collateral Management and Securities Lending, Euroclear SA/NV Sanjiv Ingle, Managing Director, Societe Generale Jean-Robert Wilkin, Executive Director, Head of Product Management, Clearstream Banking SA 11.45 Summary of the discussions and next steps Nicholas Hamilton, Executive Director, J.P. Morgan (Chair of the ERCC Operations Group) 12.00 Event Close
ICMA ERCC Operations Seminar 2016 10 February 2016 Did we join the dots?
ICMA ERCC Operations Seminar 2016 10 February 2016 The ICMA TMA template and a supplementary Glossary of Terms were published on 8 December 2015 and can be downloaded from the ICMA website !
(1) Identification and reporting of SFTs: Pre-ISD
OTC Pre-Trade Documentation No CCP 0 0 (e.g. GMRA) 1 Broker 1 Trade Buyer Seller execution Matching 2 2 & system matching 3 Trade 3 TR reporting 4 4 5 5 6 6 Clearing Purchase leg Settlement Custodia Custodia 4 4 n B n S Lifetime 5 CSD 5 of trade 6 6 Repurcha se leg
OTC Regulatory impact No CCP # Process Relevant requirements and reference • GMRA (to be modified to account for buy-ins) [section 1*] • ICMA Secondary Markets R&R (to be modified to account for buy-ins) 0 GMRA documentation in place • ERC Repo Best Practice Guide (incl. TMA template) [section 1] • Collateral re-use risk disclosure to be established (SFTR) [section 2.1] 1 Trade execution N/A • Trade confirmation rules (CSDR) [2.4] • Needs to capture all information required for reporting purposes (see 3) 2 Confirmation & affirmation process • Needs to cover at least all fields required in the settlement instruction (see 4) • Based on ERC TMA template • Reporting under EU SFTR [2.1] • ECB MMSR [2.2] • BoE sterling money market reporting [2.3] • FSB work on SFT data [2.5] 3 Trade reporting • MiFIR transaction reporting (tbc) [3.2] • See the Data Items Overview table for more details on the required fields • Tight reporting timeline may require reporting prior to trade affirmation/confirmation & subsequent procedures to identify and report adjustments • Treatment of confidential data items (e.g. haircuts) • Mandatory matching fields (CSDR) [2.4] 4 Settlement instruction • Needs to allow CSD to correctly determine SFT exemption under CSDR [2.4] • Needs to fulfil CSD (fails) reporting requirements under CSDR [2.4] • CSD to provide participants real-time access to settlement/matching status and daily 5 Matching & settlement status information on penalty calculations [2.4] 6 Lifecycle management • Tracking of re-use under SFTR [2.1] * All references are to the ERCC Ops SFT regulatory overview paper, which is available here.
(2) CSDR settlement discipline and SFTs: Post-ISD
No CCP Pre-Trade Fail (delivery) Trade execution & 0 processing 4 Buyer Seller 3b 2b Trading Trade venue/ reporting 3b OTC 2a 6 6 Buy-in Clearing 3a agent 0 0 1 1 Purchase 4 leg 7 7 Settlement Lifetime of trade Repurcha Custodian Custodian 7 7 se leg 6 6 B CSD S 1 1 0 0 Post ISD
No CCP Regulatory impact Fail (delivery) # Process Relevant requirements and reference • CSDR requires all parties in the chain to have appropriate contractual arrangements in 0 Contractual arrangements for buy-ins place ensuring that the buy-in obligation is enforceable (including with non-EU counterparties) [art. 25, draft RTS] • CSD to provide real-time access to status of instructions and fails, as well as daily 1 Information on fails and penalty calculation information on the calculation of penalties for each failed transaction [art.17, draft RTS] • As soon as the extension period is over, receiving trading party to appoint the buy-in agent (2a) and send buy-in notification to the failing party (and CSD) (2b) [buy-in process 2 Initiate buy-in process specified in art.30-31, draft RTS ] • A correct application of the SFT exemption requires the identification of repos at instruction level (“transaction type field”) as well as terms (maturity etc) • Buy-in agent to execute (3a) 3 Buy-in execution and notification • Receiving trading party to notify failing trading party of the result (3b) • If buy-in is successful : Failing trading party pays difference between buy-in price and original transaction price and buy-in costs to the receiving counterparty • Custodian of failing trading party liable for the price difference in case the trading party Payment of cash compensation or buy-in does not pay 4 price difference • If buy-in is not successful : Failing trading party pays cash compensation to receiving party • Both payments are asymmetric (ie payment is 0 if the price difference is in favour of the failing party) [art.32-35, draft RTS] Cancel settlement instruction (and • Buy-in successful : Instructions to be cancelled and new instruction to be sent 6 • Buy-in not successful : Settlement instructions to be cancelled reinstruct) • CSD to charge/ credit participants cash penalties on a monthly (net) basis (based on Charge/ credit penalties (monthly billing) 7 gross calculation) [art.16-17, draft RTS]
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