Automation is becoming increasingly relevant when dealing with borrowers, according to a panel at the IMN Beneficial Owners’ International Securities Finance and Collateral Management conference
Marney McCabe, senior vice president at Brown Brothers Harriman, notes that BBH has invested “tremendously” in automation. She says, “Automation is becoming increasingly relevant when dealing with borrowers and is a very important tool in maximizing returns for our clients.”
After spending several years focusing on data transparency for their clients, BBH is primarily focused on execution. “We have very attractive loanable assets, but they are only as good as the counterparties we engage with. What we are seeing is that the counterparties we engage with have higher expectations for automation and increased matching.”
Echoing a similar sentiment, head of agency lending at Fidelity Investments, Justin Aldridge, said the company intends to improve its distribution capabilities through its automated lending technology, which is the centerpiece of the Fidelity offer.
The “State of Play for the Global Securities Finance Market” panel – which also heard from Vice President of Securities Finance at S&P Global Market Intelligence Melissa Gow and eSecLending CEO Craig Starble – found that many companies were increasing their investments in technology, particularly in tools that help beneficial owners monitor the performance of their lending programs and ensure that their program parameters are being met.
Companies are also incorporating environmental, social and governance (ESG) data into securities finance lending, and eventually consider doing so with collateral. The purpose is to assist in the process of determining when to vote, or when to hold, with respect to proxy voting.
Starble notes that there is a forced technological focus for lending agents on regulations, including Securities Financing Transactions Regulation (SFTR) and Central Securities Depository Regulation (CSDR).
“We spent a lot of time developing the technology and working with industry utilities to prepare for the various new regulatory implementations such as SFTR and CSDR. The same will probably be needed for the eventual SEC 10c-1 Proposal.” Starble explains.
“We are also spending a lot of time automating more of our end-to-end trading and operations functionality by connecting to some of the existing platforms being built in the industry. These technological utilities are becoming invaluable to our market.
Starble emphasizes the importance of determining whether new technology initiatives will change customer revenue data.
While being innovative and creating interesting technology is great from a visionary perspective, it becomes difficult to justify the investment in technology, in the long list of things companies need to do, if it doesn’t translate into a income improvement.