Date: 6 September 2023
Time: 3pm to 4.15pm | Location: Bank of England / Hybrid
The Committee was informed that Terry Barton has replaced Glenn Handley as Co-Chair of the UK Money Market Code Sub-Committee (the Committee).
Item 1. Introduction
The Co-Chairs welcomed everyone to this hybrid meeting of the Committee including Helen Willingale (Blackrock). Helen was attending for the first time as a new member of the Committee.
Christopher Mundy (Euroclear) and Ian Mair (LMMA) were invited to the Committee meeting to give presentations on Agenda items 3 and 4 respectively.
Isabel Blackburn (ACT) attended the meeting as part of the Bank of England’s Meeting Varied People initiative, part of the Bank’s Diversity and Inclusion initiative.
Item 2. Minutes of last meeting
The Co-Chairs noted that the minutes of the last meeting had been published on the Bank’s website.
Item 3. An update on fails (including in DBV space)
Settlement rates have improved over the last year from 95% in October 2022 to 99% over the last quarter. Auto splitting and calmer markets have contributed to this improvement. Auto splitting has accounted for up to £4bn to £5bn extra gilts settling on the day. Settlement rates for Delivery-by-Value (DBV) are also quite high (99.85%) and fails are rare. However this is still a problem for the market as in theory there should not be fails in DBV. Four main reasons were proffered for fails including in DBV: (i) Technical changes made by CREST; (ii) the cross contamination between settlement processes for specific gilts and DBV. (iii) when the ‘failing’ clients has not covered their positions at all and; (iv) when the ‘failing’ client has been ‘failed into’ by another counterparty. Both LCH and CREST have been working with their respective members to further reduce the number of DBV fails. Furthermore LCH and CREST have been liaising with each other to try to find solutions to the problem. It was noted the auto borrowing (when introduced) should also help improve settlement rates further in the repo market.
Item 4: Update on the work of the LMMA’s Working Group on fails in repo market
The LMMA have (this year) reconvened a Working Group to look into fails in the repo market. Work has not started yet but the Working Group has set out a timetable which incidentally dovetails with the timetables of the Repo Working Groups of the UK Money Market Code Sub-Committee (which is going to review the Code) and Securities Lending Committees. The LMMA met with the DMO and is in regular contact with LCH and the Bank on this issue. Next on the Working Group’s plan is to meet up with the Euroclear. In the meantime, it is liaising with the Securities Lending Committee’s Working Group on fails. The LMMA Working Group’s approach is going to be to ask each of its members what improvements they would like to see from: (i) LCH, (ii) Euroclear, (iii) DMO and; (iv) the Bank. This exercise is mainly to ensure that the Working Group is able to come up with a list of improvements that can be realistically achieved with existing technology and systems. It was emphasised that settlement efficiency should be taken more seriously by the London Money Market, whatever the extent of the market participants activities in the repo market i.e. big bank or small player. It was further noted that it is the responsibility of market participants to maintain high standards of professionalism in the money market for themselves and also to ensure that those acting on their behalf maintain those standards in their activities in the money markets. It was noted that the issue of financial penalties might come up during this work.
The Bank endorsed the comments about maintaining high professional standards in the London Money Markets.
The LMMA plans to provide an update of the Working Group’s work soon.
Item 5. Review of the Money Market Code
There is a commitment to reviewing the UK Money Market Code every three years and so the Code comes up for review in April 2024. Bank Staff set out the approach for the review which essentially involves setting up four Working Groups (made up of members of the UK Money Market Code sub-Committee and industry experts) to review each of the four chapters of the Money Market Code. The Explanatory Notes to the Code will also be reviewed.
The plan is to have a draft Code ready by the end of the year. The draft Code will then be circulated to all members of the Bank’s Committees i.e. Money Market Code Committee, the Money Market Code Sub-Committee and the Securities Lending Committee and the respective institutions of said members, other buy-side and sell-side firms, stakeholders and trade associations for comment. Comments received will be reviewed initially by a smaller group made up, probably of the chairs of the Working Groups. The aim is to have a final draft for sign off by the Money Market Code Committee and Money Market Code Sub-Committee in March 2024 in time for publication in April 2024.
Some of the issues to be considered during the review this time round are: reinforcement of the messaging around settlement disciple and high standards of professionalism in the London Money Market, unexpected Bank Holidays (likely to set out a link to best practice in the event of an unexpected Bank Holiday), information on where to look for guidance on what to do during a non-standard CREST closure, and potentially standardisation in the look-back period for floating rate CDs.
There was a short discussion on whether there was anything in the current version of the Code which is preventing corporates from signing up to it. It was suggested there be a meeting between, in the first instance, Bank staff and a small group of UK Treasurers from a number of ‘big’ corporates to be followed by a meeting with a much wider group of Treasurers might help tease out some of the issues that are currently preventing corporates from signing up to the Code.
There was also a discussion about whether firms should be required to re-attest to the ‘new’ Code. The Committee recognised that requiring all firms to re-attest to the ‘new Code might lead to fewer signatories than there currently are. The Committee agreed to adopt a flexible approach by recognising attestations to the ‘old’ Code until firms have had time to review and attest to the ‘new’ Code.
Item 6. Diversity and Inclusion (D&I)
Members shared initiatives currently being undertaken to increase Diversity and Inclusion in the UK Money Market. The Women in Securities Finance London network have run several rounds of their Grow Your Network initiative connecting people across the industry on a cross-organisation, cross-level and cross gender basis. In addition, the Women in Securities Finance London network has held several events over the course of this year, aimed at encouraging discussion on D&I, as well as helping members of the UK Money Markets deepen their professional networks and access more information on the different skillsets making up the industry, both at new talent/entry level and at more advanced career.
The International Securities Lending Association (ISLA), has recently introduced an initiative to offer significantly discounted registration prices to attend their annual conference, which is available to juniors or people who have not previously attended their conferences, in order to encourage accessibility. The Association has also launched ‘ISLA Connects’ this year, which facilitates meeting between junior and senior staff through networking events.
One member also mentioned an initiative, within their firm, which encourages members of the senior management team to bring along junior colleagues to senior management team meetings.
It was noted that Diversity and Inclusion will be discussed at the next meeting of the 20 largest UK Group Treasurers. It was also noted that ACT provide free places to ethnic minorities to undertake their qualifications.
The Committee agreed that there is still much that can be done to accelerate progress in this area and at a first stage, recognising and understanding the barriers is essential, in order to better evaluate potential actions which firms can take to drive positive results.
Item 7. AOB
James Winterton - Association of Corporate Treasurers
Alessandro Cozzani – BofA
Ina Budh-Raja (Co-Chair) - BNY Mellon
Jack Skinner - DMO (Observer)
Christopher Mundy - Euroclear (invited for presentation)
Oliver Clark - FMSB (MTS)
Ned Taylor – HSBC
James McKerrow - Insight Investment
Antony Baldwin - LCH
Veronica Iommi – IMMFA
Antony Baldwin – LCH
Andrew Welch – LGIM
Ian Mair - LMMA (invited for presentation)
Mark Thomasson - National Westminster Bank
Terry Barton (Co-Chair) – Nationwide
Philip Chilvers - TP ICAP
Helen Willingale – Blackrock
John Edwards - CME Group
Vicky Worsfold - Guildford Borough Council
Veronica Iommi – IMMFA
Bola Tobun - London Borough of Enfield
Nic Erevik - Newcastle Building Society
Gordon Lowson - Aberdeen Standard Investments
Malvi Ruparelia - Barclays Capital
Paul Johnson - Financial Conduct Authority
James Eldridge - Financial Conduct Authority
Andy Green - Hoare & Co / LMMA
Andy Dyson - ISLA
Bank of England