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Liquidity is still strong within the securities finance marketplace and the ability to access liquidity via multiple channels remains crucially important, according to one panellist during the Securities Finance Technology Symposium.
During the Challenge of Improving the Liquidity Chain panel, four panellists discussed the current state of the liquidity landscape.
Panellists included Staffan Ahlner, head of Collateral+, senior vice president of State Street;
Grant Davies, head of sales EMEA at EquiLend; BJ Marcoullier, head of sales and business development at Transcend Street Solutions; and David Raccat, CEO of Wematch.Securities Financing.
Led by Gabriele Frediani, managing consultant at ZBO International, the panel notes that the liquidity space is less daunting with the influx of technology and solutions.
One panellist says: “We want to encourage liquidity, whether that comes through on securities borrowing and lending (SBL), repo or Total Return Swaps (TRS).
“The key is to manage these processes efficiently while minimising latency, ensuring that you are able to manage your post-trade connectivity so that if you do trade, the transaction settles.”
He continues, by streamlining liquidity access and by reducing the frictional constraints, this means it is easier and more cost-efficient for clients to enter this market and find access to that liquidity. He circled back to his main point, stating: “If it’s a booked trade, you need to find liquidity, you need to be able to settle the transaction and you need to do the reg reporting component of it as well. It is meant to be complex, but we can break it down, we can make it easy for people to access and that means we can enable the market.”
Moving the agenda forward, discussion reflected on whether liquidity had become more available and accessible over time.
Responding to this, one panellist says that liquidity for them continues to grow for their market. There is latent inventory that “sits on the sidelines” but there is a lot of liquidity out there. With central banks starting to unwind their asset purchase programmes, this will have a huge effect on the market. There are more participants coming, which is welcomed, as “diversity of liquidity is incredibly important”.
Reinforcing this point, another says: “We’ve seen improvements in liquidity — whether you think about liquidity in terms of reducing unsecured funding usage or whether you think about liquidity as reducing buffers for intraday flows. Everyone is making strides towards improving their efficiencies and controls. Liquidity is the grease that allows our clients to take more risk, to respond to market conditions.”
Concluding this final point, a third panellist notes that the market is operating extremely efficiently. There are capital constraints that make some trades unprofitable, but overall definitely liquidity is in the market.
