Securities services under geopolitical pressure, say AFME panellists
04 October 2022 UK
Image: Nuthawut
Securities services are having to adapt faster than ever in the face of unprecedented geopolitical events, increasing regulations, and client demand, say panellists at AFME’s Operations, Post-Trade, Technology & Innovation Conference (OPTIC).
These conclusions emerged from a panel entitled ‘The Securities Services Business: Opportunities and Threats’, which discussed the role of technology in the securities services industry, along with what clients are asking for, and predictions for the future of digital assets.
Opening the panel with an acknowledgement of the macroeconomic and geopolitical situations impacting the industry, as had become customary for the conference, Neil Atkinson, Managing Director, Platform Sales (for Banks and Broker Dealers), Securities Services at HSBC, stated that clients are looking at their contingency plans, and considering whether whether they invest in their local and international footprint or not.
Ivan Nicora, head of investor services and managing director at Euroclear, agreed that the macroeconomic climate is prompting “difficult choices” to be made on behalf of both clients and security service providers. He said that the industry was “learning as we go,” and is not equipped for the rapid changes that the market is facing.
The changes are often so drastic that they require a rethinking of business operations, a solution to which is partnering with fintechs, he said. This point was later picked up by María Elena Mesonero, head of regional coverage for Spain and LatAm at CACEIS. She suggested that securities services need to combine traditional structures with fintechs to “add value to already valuable models”. Moving away from legacy systems, she advises using an interconnected ecosystem to deliver services.
Nicora suggested that a pathway needs to be found from legacy to new technologies, working at a pace that suits all market participants. Replacing an “all or nothing” approach, will ease the transition into the next age of securities services.
However, Atkinson highlighted that inflation and a high quantity of regulation may make investment into technology less viable for some companies. Nicora added that the myriad complex regulations that companies are facing have “immobilised a disproportionate amount of resources,” limiting the services they can offer to clients.
Nicora also stated that regulators have started to become aware of the pressure they are putting on companies in recent years. Citing a disconnect between the worlds of regulators and practitioners, he emphasised the cost and time required for regulations to be adapted and adhered to. He also highlighted the importance of safety, as well as competition, in the market.
Mesonero emphasised the importance of engaging with clients. “They know what it takes to run their business,” she said, claiming that it is a “must” for security services to listen to what clients want as the industry evolves.
Turning to audience questions, the role and responsibilities of securities services in consideration of ESG was brought up. Nicora stated that this is a fundamental element of the selection process for clients, and if companies are not ESG-minded then they will not be used. Atkinson added that good governance has long been a feature of securities services, while Mesonero believes that improvements are needed around reporting.
Throughout the panel, speakers agreed that securities services must, and are, evolving to work in a volatile, unpredictable market. Although increased regulation and more intense client demands are putting pressure on the industry, solutions are being put in place to ensure success and longevity.
These conclusions emerged from a panel entitled ‘The Securities Services Business: Opportunities and Threats’, which discussed the role of technology in the securities services industry, along with what clients are asking for, and predictions for the future of digital assets.
Opening the panel with an acknowledgement of the macroeconomic and geopolitical situations impacting the industry, as had become customary for the conference, Neil Atkinson, Managing Director, Platform Sales (for Banks and Broker Dealers), Securities Services at HSBC, stated that clients are looking at their contingency plans, and considering whether whether they invest in their local and international footprint or not.
Ivan Nicora, head of investor services and managing director at Euroclear, agreed that the macroeconomic climate is prompting “difficult choices” to be made on behalf of both clients and security service providers. He said that the industry was “learning as we go,” and is not equipped for the rapid changes that the market is facing.
The changes are often so drastic that they require a rethinking of business operations, a solution to which is partnering with fintechs, he said. This point was later picked up by María Elena Mesonero, head of regional coverage for Spain and LatAm at CACEIS. She suggested that securities services need to combine traditional structures with fintechs to “add value to already valuable models”. Moving away from legacy systems, she advises using an interconnected ecosystem to deliver services.
Nicora suggested that a pathway needs to be found from legacy to new technologies, working at a pace that suits all market participants. Replacing an “all or nothing” approach, will ease the transition into the next age of securities services.
However, Atkinson highlighted that inflation and a high quantity of regulation may make investment into technology less viable for some companies. Nicora added that the myriad complex regulations that companies are facing have “immobilised a disproportionate amount of resources,” limiting the services they can offer to clients.
Nicora also stated that regulators have started to become aware of the pressure they are putting on companies in recent years. Citing a disconnect between the worlds of regulators and practitioners, he emphasised the cost and time required for regulations to be adapted and adhered to. He also highlighted the importance of safety, as well as competition, in the market.
Mesonero emphasised the importance of engaging with clients. “They know what it takes to run their business,” she said, claiming that it is a “must” for security services to listen to what clients want as the industry evolves.
Turning to audience questions, the role and responsibilities of securities services in consideration of ESG was brought up. Nicora stated that this is a fundamental element of the selection process for clients, and if companies are not ESG-minded then they will not be used. Atkinson added that good governance has long been a feature of securities services, while Mesonero believes that improvements are needed around reporting.
Throughout the panel, speakers agreed that securities services must, and are, evolving to work in a volatile, unpredictable market. Although increased regulation and more intense client demands are putting pressure on the industry, solutions are being put in place to ensure success and longevity.
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