Date of meeting: 4 November 2021
Location: This meeting took place via video/audio link
Item 1 – Opening remarks
The Chair welcomed those who had joined the meeting of the Post-Trade Task Force (the “Task Force”) and thanked those who had provided feedback on the draft final report (the “Report”).
Item 2 - Discussion on Task Force report and recommendations
The Chair led a discussion about the extent to which the issues addressed in the Report could be solved by commitments and changes made by the institutions represented on the Task Force alone. It was recognised that a key challenge (and part of the reason these issues remain outstanding notwithstanding earlier attempts to address them) is that, at individual institution level, the costs of addressing these issues are material while the benefits from doing so cannot be realised unless measures are adopted industry wide. As the incentives for smaller users to make such changes are less, the likelihood of securing such industry wide adoption is low, and therefore such changes are typically not deemed a priority for discretionary spending allocation even amongst the largest industry participants. Thus, as recognised in the draft Report, the Task Force’s view is that only with support of some type from regulators is change likely to take place that materially addresses the issues. However, the Task Force acknowledged that the regulatory agenda was typically full and it was incumbent on the industry to take as much action as they could independently, and for the Task Force to explain articulately where regulatory action would contribute to the common good of the market that could not be achieved through independent action.
The Task Force identified a number of reasons why regulators might see these issues as priorities. Whilst some of the issues relate to efficiencies and thus if solved would result in costs savings, the issues discussed by the Non-Economic Data and Uncleared Margin working groups create operational risks which in a stressed situation could create systemic risk. Also, the length of time taken to onboard clients is clearly not in the best interests of clients and could affect the competitiveness of the UK market.
The Chair summarised the three main reasons why the Task Force believed these were matters that should be of concern to regulators. Firstly, solving them could make the UK a more attractive place to do business. Second, the suggested measures would only be beneficial if adopted by the whole market, but the Task Force (or similar) alone cannot drive industry-wide change and regulatory impetus is required to change the cost-benefit analysis for all. Thirdly, the issues outlined, if left unaddressed, could pose or contribute to an important prudential and systemic risk in a time of stress.
The Task Force members agreed that the recommendations are sensible and that they are all things their institutions should implement, but that it would only become a priority to do so when the benefits could be realised, which required market-wide change.
In terms of client onboarding, the Task Force agreed it would be useful to spend time with the regulators with a view to reducing the vagueness around onboarding requirements and implementing LEIs on all transactions in wholesale markets.
On collateral management, the Task Force noted the FCA's efforts on operational resilience and agreed it could be effective to require publication of statistics, and that this could fit neatly within the existing operational resilience regime. Requiring reporting of failure rates alongside reasons would focus attention to fixing these issues.
Turning to the suggestion on developing a Post-Trade Industry Leadership Group, the Task Force members noted that they and other senior individuals within their institutions agree that these issues are worth dedicating more time to, if there is a reasonable prospect of measures being implemented.
Item 3 - Administrative matters
The Chair requested approval for a final 2021 Linklaters invoice that was slightly higher than the previous 2021 estimate due to additional work performed in relation to report writing and review, one additional Task Force meeting, and continuation of the project beyond the originally anticipated 12 months. There were no objections from the Task Force members and the Task Force instructed Linklaters to proceed to invoice each Task Force member.
Item 4 – Next steps and closing remarks
In terms of next steps, the Chair noted that a meeting would be set up with the Bank of England in the next few weeks. The Task Force would share its suggestions and requests in that meeting and then there would be a period of time for the regulators to consider. Following those conversations, the requests and next steps to be outlined in the report could be finalised.
The Chair noted that the draft report is otherwise close to final and invited any further comments to be sent via email. The aim is to circulate a final report at the end of November with a view to publication at the beginning of December. This could then be followed by engagement with the regulators in early 2022, depending on the appetite for this from the regulators.
The Chair thanked the Task Force members and their institutions for all their efforts, as well as AT for authoring the report. The Chair closed the meeting.
David Hudson (Chair), JP Morgan
Robert Lamb, Blackrock
Chris Bush, Bank of America
Gerson Riddy, Barclays
Andrew Douglas, DTCC
Gareth Jones, Euroclear
Risa Lederhandler, Goldman Sachs
Marcus Robinson, LCH
Siobhan Clarke, M&G Investments
Philip Glackin, JP Morgan
Sanjay Dhir, JP Morgan
Mike Irwin, XTX Markets
Merav Pepere, Morgan Stanley
Akbar Sheriff, State Street
Jeremy Lewis, Credit Suisse
James Tulloch, Bank of England
Michael Kent, Linklaters
Bethan Poole, Linklaters
Anabel Thomson, Re:link
Clair Graystone, Morgan Stanley
Aamanveer Binning, M&G Investments