Senior Policy Advisor
Vincent, can tell us about yours and EFAMA’s role within the finance industry, and how you are working with asset managers?
EFAMA is a trade body, representing regulated funds across Europe “as a continent”.
We are organised around national associations (from Finland to Cyprus and from UK to Turkey) and funds and asset management companies having a global or at least continental outreach, not to forget some large law firms or consulting firms.
We are 15 person in total including supporting team and the regulatory team is a team of 6 (1 director and 5 Senior Policy Advisors, all different and specialised background in finance, asset management or within authorities).
I am lawyer by training, with a focus on a market structures and trading, hence my scope is MiFIR, EMIR, SFTR, etc.
EFAMA’s work with and for asset managers has several angles: the collection and analysis of early legislative initiatives that could impact our industry as well as their follow-up up to their implementation at EU Level, the information of members of the possible impacts and the development of the EU asset management views (sometimes very different from the banking views for example) and lastly the dissemination of those views as persuasively as possible.
Naturally, the whole community seems to be solely focused on MiFID II right now. From your experience, what do asset managers & financial institutions still need to solve?
It is fully right to consider that the focus in on MiFID II implementation.
This legislation has major impact on our industry too despite being only one of the organisation models of asset management in Europe.
Regarding elements to solve, I trust that the first elements has been the “switch test” i.e. will the markets still work on 4 January. The reply has been a clear “yes”.
What remains open is interpretation and application issues around topics such as investment research, report on best execution and review of services provided.
All these aspects will require efforts, time and are different almost from one asset manager to another.
Additionally, how can the authorities – both national and European – help provide more clarification on MiFID II?
Here again I trust that there are multiple aspects to the question:
– The communication between authorities (European and national as well as between national authorities);
– The communication between market participants and national authorities
– The communication between market participants and EU authorities.
In a nutshell, this means (i) building trust; (ii) understanding both sides’ difficulties and objectives because this last part is too discarded and (iii) recognise the differences in business models and different level of authorities.
One of the panels that you’ll be moderating at TSAM is looking at the EMIR amendments made earlier this year. In regards to this, where do you stand globally on the margins for FX?
Margin are globally a difficult topic for asset managers and margin for FX even more.
From our perspective, the implementation of margin set for 1 March 2017 has been utterly challenging. To give a rough idea of the challenge, a UCITS structure has on average between 80 and 120 compartments. All of which have on average 10 counterparties, all with different requirements. The contracts and final texts were published at the end of 2016. Each compartment must have contract with each counterparty… It is obvious that the challenge has been gigantic.
The challenge for the margin of FX is even more complex due to several technical aspects:
– The direction nature of the management of the portfolio of asset managers suppress the possibility to net exposure before margining
– The asset managers have only limited leverage capability and are providing margin on own asset
– Collateral for FX is usually (if not always) cash and margining “cash transactions” in cash is potentially creating another risk.
– Lastly the definition of FX encompasses different assets (forwards and swap) that have a different treatment in Europe and different also from other countries practices.
So, our efforts are to (i) explain the differences; (ii) demonstrate impacts; and (iii) propose workable solutions on a short term and on the long term.
Could you provide us some more insight into the three aspects of the EMIR review and how exactly they’ll be having an impact on asset managers?
The first point, the more crucial one, is to ensure an increased protection of investors because the text are considering the protection of tax payers and tends to forget that in many countries (those where pension funds are mandatory) it is the same persons.
The second point is more technical and refers to the need to avoid duplication of reporting or deep changes in systems as all create costs that are impacting returns for clients.
The last point is the need to be able to exchange collateral, therefore there is a need for liquid instruments and access to liquid instruments or to transformation into collateral which is almost forbidden for asset managers.
Join Vincent alongside peers from Lloyds Banking Group, the FCA and more at the Regulations & Compliance Forum at TSAM London on the 13th March 2018. Visit https://www.tsamlondon.com/ for more details and to book your place.