俗话说得好, 当下雨的时候, 它倒, which couldn’t be any truer for 买方公司 when it comes to the perfect storm of new regulations going live this year. On top of rules that have already come into force in recent years, the buy-side faces an unprecedented degree of financial and operational challenges in 2020 and beyond.
他们会如何回应? From my many conversations with hedge funds, asset managers and other clients, we can expect another year of scrutinizing budgets, difficult resource allocation decisions and added costs for staffing, reporting systems and technology upgrades. Some firms are so overwhelmed, they’re planning on outsourcing their regulatory-related functions.
The Compounding Impact of New Regulation
On tap for 2020 are Uncleared 3月gin Rules (UMR), along with key provisions of the Securities Financing Transaction Regulation (SFTR) and Central Securities Depositories Regulation (CSDR). UMR impacts firms globally and SFTR and CSDR, 虽然起源于欧洲, will impact any firm with transactions executed in Europe. Financial institutions are also feverishly readying for Libor transition and Brexit adjustments. Needless to say, it’s going to be an intense period of regulatory change for the financial sector.
对于买方而言, this regulatory tsunami is challenging traditional operating models and introducing new costs and regulatory reporting requirements. 例如, UMR的波5和波6, taking effect in 2020 and 2021, 分别, will predominantly impact funds and institutional investors, requiring 买方公司 to acquire skills to perform functions they’ve never done before.
Many firms are expected to make securities lending a key element of their liquidity management strategies to offset the operational and funding costs of UMR. 然而, this reliance on securities lending will increase reporting obligations under SFTR and could have an adverse effect as firms look to mitigate settlement risk under CSDR. This illustrates the compounding impact of these multiple regulations and reinforces the law of unintended consequences.
Acute Challenges for the Buy-Side
结果是, 买方公司, which are already grappling with intense cost-cutting pressure and tight operating margins, now find themselves in the difficult position of having to also upgrade in-house systems or perform major overhauls of out-of-date platforms to meet their regulatory mandates and grow their client-service capacity. 越来越多地。, many 买方公司 are instead looking to outsource some compliance functions to third parties to avoid the investment needed to modernize their infrastructure.
One client told me that with regulation moving so quickly, it’s more cost-effective to have a vendor take on the responsibility of implementing constant technology revisions. 在他们看来, a service provider has the subject-matter expertise and capacity to monitor ongoing developments in the regulatory environment, 比如时间表修订, expansion of scope and extension to new jurisdictions, to quickly make the required and costly system changes for their clients to maintain compliance. I expect this trend to continue well into the future as the buy-side is forced to manage a host of new regulations amidst a diverse set of business demands.