Tuesday, October 20, 2020

Squaring ESG with Securities Lending

Compliance without Knowing the Borrower's Purpose - Is it Possible?

Author: David Schwartz

Sustainable investing is becoming more important to investors when creating portfolios. As a result, institutions often follow policies with formal environmental, social, and governance (ESG) factors to guide their investments. They commit substantial resources to ESG research and produce comprehensive reports about their compliance.[1] But then the same institutions give away their proxy votes when they lend securities for fees to cover their bank charges. And the loans of those securities – and their proxies – go to borrowers with unknown intentions, and often with unknown identities.

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Wednesday, September 30, 2020

Alarm Raised on Stock Loans for "Withholding Tax Schemes”

Findings Point to a New Role for Emerging Fintech

Author: David Schwartz

European commissioners are reviewing a study from their securities and market authority (ESMA) that includes a recommendation for new laws to combat unfair trading practices and an extended remit for National Competent Authorities (NCAs) to conduct snap audits of securities loans and transactors. Loans deemed to be suspicious would prompt an inquiry to determine penalties for unfair strategies and inappropriate beneficiaries. However, useful audit results may be doubtful based on our preliminary review that uncovered shortcomings in the proposed SFTR surveillance datasets, as well as possible flaws in the study’s basic methodology. 

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Wednesday, July 3, 2019

ESMA Takes a Look at Tax Withholding Schemes

Proposes Some Best Practices and Promises a Follow-up Study

Author: David Schwartz

The European Securities and Markets Authority (ESMA) has published the findings of its preliminary study of multiple withholding tax (WHT) reclaim schemes. ESMA conducted this preliminary study at the request European Parliament (EP) and has launched a formal inquiry to gather further evidence from national competent authorities (NCAs) on the supervisory practices and experience regarding those schemes.

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Tuesday, February 19, 2019

Systems Experts Set the Bar for Blockchain in Securities Finance

“Hype and Reality for Blockchain and Distributed Ledger Technologies” at Institutional Securities Lenders’ Meeting

Author: Ed Blount
February 6, 2019 —Systems entrepreneurs - Armeet Sandhu, Sal Giglio, and Ed Blount - engaged in a lively brainstorming session with Chris Ferris, IBM’s Distinguished Engineer for Open Source Technologies, at IMN's 25th Annual International Securities Finance and Collateral Management Conference. Key take-aways from the panel discussion were:
 
  • Current private blockchains are no more complex than web servers, but creating the design and consortium is challenging; 
  • IBM has tools to preserve confidentiality in shared ledgers while guaranteeing accountability;
  • Off-chain lifecycle event processing can link to the blockchain and prove to the shared ledger; 
  • Shared ledgers can help lenders comply with the Securities Finance Transaction Repository (SFTR) mandate;
  • Blockchains can help track loans for principals and service providers in peer-to-peer (P2P) lending programs. 
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Thursday, January 10, 2019

Taking Stock of Blockchain for Improving Securities Services

Initial hype has ebbed and real progress is being made

Author: Ed Blount

The early torrent of media hyperbole about distributed ledger technologies (DLT), such as blockchain and shared ledgers, has now been supplanted by reflection on lessons learned. Scaling concerns were allayed to some degree by DTCC’s November 2018 report that its study of throughput capacity for DLT was sufficient to handle massive U.S. equity trading volumes. More positive ink came as a group of 15 global banks reportedly eased ahead from initial testing to a planned 2Q19 start date for adopting the newly re-coded $11 trillion Trade Information Warehouse at DTCC, in which IBM created a shared ledger for tracking the lifecycle events of 98% of all credit default swaps.

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