The International Securities Services Association (ISSA) is on a drive to diversify. Sibos Issues spoke with ISSA chairman Josef Landolt and secretary Urs Sthli on the association’s plans.
Q: You recently revamped ISSAs structure, introducing working groups that reported for the first time this year. What was the thinking behind the change?
Landolt: Globally were the only organisation to cover the whole value chain of the financial services industry. But it isnt a huge organisation so weve focused on the topics our members are most concerned about. Well be working intensively with other organisations such as ISDA (International Swaps & Derivatives Association) and the AGC (Association of Global Custodians). Otherwise, the big danger is that you duplicate the work already done by others.
Q: Which issues are your members most concerned about?
Landolt: The working Group reports presented at the ISSA symposium in June this year clearly showed the need to address collateral management, hidden risks, and communication standards.
Sthli: But the example of corporate actions shows that addressing issues of wider concern is not so easy. ISSA issued its first paper on corporate actions 25 years ago. Now, 25 years later, were still talking about standards. In those days we were talking about structuring messages. Now were talking about the whole value chain. But its clear that today custodians are still the ones who have to translate issuers prospectuses for end-investors even though the issuer should be able to put something in simple words that can be understood by the investor.
Q: So why havent they?
Sthli:: You can appeal to issuers. Theyre the ones producing hundred-page prospectuses, but they dont want to take responsibility for investors understanding them. Custodians are cleansing five or six sources to create the so-called golden source. They could each be employing 50 people to sift through the information: thats a significant cost. Its a crazy industry.
One incentive would be to create standards for proxy voting. Issuers are much more interested in that because its their life-blood. It facilitates information from the issuer to the end-investor in a much more streamlined way.
What else is on ISSAs agenda?
Landolt: Collateral management is one topic. It will be a huge challenge to get the right collateral in the right place at the right time. It goes with another topic OTC derivatives, which will play a role in collateral management. The question is how you value derivatives because that will tell you how much collateral you have to bring in.
Its relevant for the whole value-chain for custodians, CSDs, broker-dealers and asset managers, and also for CCPs.
Another topic is out-of-network assets for example, collateral for securities lending deposited elsewhere and not under the custodians control which came out of the working group on hidden risks.
Q: Youve talked about supporting other organisations in their efforts to lobby regulators. How will that work?
Landolt: Historically, the financial services industry has been reluctant to give too much information to regulators. But today theres a totally different understanding. The regulators always have the stronger hand because they make the rules. But if the industry cant manage the rules, for some players it will be the end of the road.
Q: In the meantime, what further changes are planned for ISSA?
Landolt: Well increase the Board from 11 members to between 15 and 18. Its a clear ambition to look for much more diversification at board level with respect to both disciplines and geographies. Were strong on CSDs and global custodians. Were weak on the broker-dealer side and we have a big challenge to attract asset managers. At the same time, were strong in Europe and North America but were weak in Asia and Latin America. So we have a clear idea of who we want to add to the Board from those regions. Were also striving to gain more members from these constituencies.
– Printed in Sibos Issues