The fintech firm HQLAx recently hosted their Conference in London, featuring several industry experts including our own Anne Taieb of wematch.live, to debate the pain points in the securities lending industry and potential technological solutions to tackle them. The panel touched on various topics, including collateral scarcity, regulatory challenges, cross-border collateral, and the adoption of emerging technologies like distributed ledger technology (DLT) and artificial intelligence (AI).

The participants acknowledged that these challenges are not new and that certain technologies have already shown promise in addressing them. However, they recognized that the widespread adoption of technologies like DLT and AI in the capital markets may take time. While niche projects and collaborations between players are expected to emerge, the panelists noted that there is a difference between the front-office and back-office when it comes to investing in technology. The front-office tends to have more investment opportunities and can more easily embrace new technologies.

The discussion also highlighted the evolving role of operations in collateral management. In the past, front office teams focused primarily on profit and loss (P&L) considerations, while operational challenges were often overlooked. However, recent regulatory changes and operational exceptions impacting P&L have shifted the focus. Operations teams now play a more prominent role in guiding front-office decisions and ensuring operational efficiency.

The potential of new technologies to reduce risk and improve data management was a key point of discussion. The panelists agreed that technology, especially in data analytics, can bring value by reducing operational risks and minimizing P&L impacts. In terms of adoption, it was suggested that larger institutions might be the initial drivers of mainstream adoption, while smaller institutions might take longer due to budget constraints.

The panelists also explored the barriers to widespread adoption of new technologies. They discussed the need for interoperability, transparency, and intraday visibility to address issues such as mobility and scarcity of collateral. They emphasized the importance of data sharing, connectivity, and standardized processes across multiple vendors and triparty agents. The potential impact of central bank digital currencies (CBDCs) on the market was also considered.

Overall, the panel expressed optimism about the potential of technology to address pain points in the securities lending industry. They emphasized the importance of collaboration, market alignment, and data transparency in driving adoption. While some areas might leapfrog into new technologies, there is recognition that fundamental issues and processes still need to be resolved. 

To learn more about Wematch, reach out.