Workshop Overview
Agenda: Day One
Agenda: Day Two
Agenda: Day Three
Date and Venue
Date: 28 - 30 October 2019
Location: London
Workshop Overview
This workshop was organised by the International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA). It analysed how repo and securities lending transactions operate within the framework provided by the Global Master Repurchase Agreement (GMRA) and the Global Master Securities Lending Agreement (GMSLA), and highlighted the issues that need to be addressed by users. These two separate but increasingly overlapping master agreements are the essential underpinnings of the cross-border repo and securities lending markets.
In order to provide a clear practical context to documentation and underlying issues, the workshop starts with a rigorous introduction to the fundamental legal and operational characteristics of repo and securities lending instruments, transactional uses and markets. The main body of the workshop is a detailed review and comparison of both legal agreements and how they structure risk and operational management. The workshop also examines the role of and special issues posed by key market infrastructures such as electronic trading venues, triparty collateral management and central clearing through CCPs, as well as the impact of accounting and tax treatments, and new regulation.
The workshop uses the GMRA and GMSLA as a framework to provide a structured approach to understanding instruments, usage and markets. No legal expertise is required. The workshop can therefore be useful, not just for legal and documentation staff, but also for front office, risk management, operational, compliance, audit and regulatory personnel.
The workshopwas introduced and co-ordinated by Richard Comotto, who is the author of ICMA’s European repo survey, its Guide to Best Practice in the European Repo Market and its Repo FAQs. Other speakers were legal and documentation professionals, and operational specialists from ICMA, ISLA, Ashurst LLP, HSBC, LCH Limited and Euroclear.
Date: 28 - 30 October 2019
Location: London
Workshop Overview
This workshop was organised by the International Capital Market Association (ICMA) and the International Securities Lending Association (ISLA). It analysed how repo and securities lending transactions operate within the framework provided by the Global Master Repurchase Agreement (GMRA) and the Global Master Securities Lending Agreement (GMSLA), and highlighted the issues that need to be addressed by users. These two separate but increasingly overlapping master agreements are the essential underpinnings of the cross-border repo and securities lending markets.
In order to provide a clear practical context to documentation and underlying issues, the workshop starts with a rigorous introduction to the fundamental legal and operational characteristics of repo and securities lending instruments, transactional uses and markets. The main body of the workshop is a detailed review and comparison of both legal agreements and how they structure risk and operational management. The workshop also examines the role of and special issues posed by key market infrastructures such as electronic trading venues, triparty collateral management and central clearing through CCPs, as well as the impact of accounting and tax treatments, and new regulation.
The workshop uses the GMRA and GMSLA as a framework to provide a structured approach to understanding instruments, usage and markets. No legal expertise is required. The workshop can therefore be useful, not just for legal and documentation staff, but also for front office, risk management, operational, compliance, audit and regulatory personnel.
The workshopwas introduced and co-ordinated by Richard Comotto, who is the author of ICMA’s European repo survey, its Guide to Best Practice in the European Repo Market and its Repo FAQs. Other speakers were legal and documentation professionals, and operational specialists from ICMA, ISLA, Ashurst LLP, HSBC, LCH Limited and Euroclear.
Day One
08.45 Registration
09.00 Repo: introduction
Richard Comotto, ICMA Centre at Reading University
• Basic mechanics, terminology
• Legal and economic characteristics of repo (including management of collateral income and accounting consequences)
08.45 Registration
09.00 Repo: introduction
Richard Comotto, ICMA Centre at Reading University
• Basic mechanics, terminology
• Legal and economic characteristics of repo (including management of collateral income and accounting consequences)
• Core uses of repo: funding long positions; covering short positions
• Risks in repo: credit, liquidity, legal & operational
10.30 Break
10.45 Repo: structures and market segments
Richard Comotto, ICMA Centre at Reading University
• Repurchase agreements v sell/buy-backs
12.30 Lunch
13.15 Repo: structures and market segments (continued)
• Risks in repo: credit, liquidity, legal & operational
10.30 Break
10.45 Repo: structures and market segments
Richard Comotto, ICMA Centre at Reading University
• Repurchase agreements v sell/buy-backs
12.30 Lunch
13.15 Repo: structures and market segments (continued)
• Main types of repurchase agreement
o fixed-rate
o floating-rate
o open
o forward
• GC and specials market segments
o fixed-rate
o floating-rate
o open
o forward
• GC and specials market segments
14.00 Repo: risk management
Richard Comotto, ICMA Centre at Reading University
• Initial margin & haircut
• Margin maintenance
• Default procedures
15.00 Break
15.15 Repo: risk management (continued)
Richard Comotto, ICMA Centre at Reading University
16.30 Repo: operational management
Richard Comotto, ICMA Centre at Reading University
• Permission for substitution
• Custody (delivery, HIC, tri-party)
• Failure to deliver
17.30 Networking drinks reception
18.00 Close of day 1
Richard Comotto, ICMA Centre at Reading University
• Initial margin & haircut
• Margin maintenance
• Default procedures
15.00 Break
15.15 Repo: risk management (continued)
Richard Comotto, ICMA Centre at Reading University
16.30 Repo: operational management
Richard Comotto, ICMA Centre at Reading University
• Permission for substitution
• Custody (delivery, HIC, tri-party)
• Failure to deliver
17.30 Networking drinks reception
18.00 Close of day 1
Day Two
08.45 Arrival coffee
09.00 Securities lending & borrowing: introduction
Richard Comotto, ICMA Centre at Reading University
• Basic mechanics
• Legal structure
• Economic operation
• Core uses of securities lending and borrowing
• Fees
• Collateral
• Securities lending versus repo
10.30 Break
10.45 Securities lending & borrowing: risk management
Richard Comotto, ICMA Centre at Reading University
• Risks in securities lending
• Risk management
• Counterparty selection
• Borrower indemnification
• Collateral selection
• Initial margin
• Margin maintenance (variation margining)
• Cash collateral reinvestment
• Default procedures
12.00 Securities lending & borrowing: operational management
Richard Comotto, ICMA Centre at Reading University
• Compensatory payments
• Corporate actions
• Voting rights
• Substitution
• Delivery
• Fails
• Delegation of collateral management
12.30 Lunch
13.15 The securities lending market
Andrew Dyson, ISLA
• The role of ISLA
• Overview of securities lending activity
• Some legal and regulatory developments in securities lending
14.15 Break
14.30 Legal and documentation issues in repo and securities lending
Christopher Georgiou, Ashurst LLP & James Knight, Ashurst LLP
• Documentation architecture of GMRA & GMSLA
• Introduction to legal and documentation issues
• Title transfer
• SFTR
• Close-out netting
• Practical issues arising out of closeouts
• Valuations in margining and determination of Default Market Value
• Use of security structures
• Recharacterisation risk
• Restructuring/voting rights
• Illegality/disruption events
16.30 GMRA Developments
Lisa Cleary, ICMA
• Legal opinions
• Pledged margin
• Brexit and the GMRA
17.30 Close of day 2
08.45 Arrival coffee
09.00 Securities lending & borrowing: introduction
Richard Comotto, ICMA Centre at Reading University
• Basic mechanics
• Legal structure
• Economic operation
• Core uses of securities lending and borrowing
• Fees
• Collateral
• Securities lending versus repo
10.30 Break
10.45 Securities lending & borrowing: risk management
Richard Comotto, ICMA Centre at Reading University
• Risks in securities lending
• Risk management
• Counterparty selection
• Borrower indemnification
• Collateral selection
• Initial margin
• Margin maintenance (variation margining)
• Cash collateral reinvestment
• Default procedures
12.00 Securities lending & borrowing: operational management
Richard Comotto, ICMA Centre at Reading University
• Compensatory payments
• Corporate actions
• Voting rights
• Substitution
• Delivery
• Fails
• Delegation of collateral management
12.30 Lunch
13.15 The securities lending market
Andrew Dyson, ISLA
• The role of ISLA
• Overview of securities lending activity
• Some legal and regulatory developments in securities lending
14.15 Break
14.30 Legal and documentation issues in repo and securities lending
Christopher Georgiou, Ashurst LLP & James Knight, Ashurst LLP
• Documentation architecture of GMRA & GMSLA
• Introduction to legal and documentation issues
• Title transfer
• SFTR
• Close-out netting
• Practical issues arising out of closeouts
• Valuations in margining and determination of Default Market Value
• Use of security structures
• Recharacterisation risk
• Restructuring/voting rights
• Illegality/disruption events
16.30 GMRA Developments
Lisa Cleary, ICMA
• Legal opinions
• Pledged margin
• Brexit and the GMRA
17.30 Close of day 2
Day Three
13.30 GMRA & GMSLA documentary issues
• Role of negotiation
• Case study
• Mini close-out
14.30 Regulatory Overview
Richard Comotto, ICMA Centre at Reading University
• Basel risk-weighted capital
• Leverage Ratio
• LCR
• NSFR
• SFTR, CSDR, MiFID/MiFIR
15.30 Close of course
08.45 Arrival coffee
09.00 Accounting for repo
09.00 Accounting for repo
Christopher Brown, HSBC
• General approaches under IFRS and US GAAP
• Application of recognition/recognition rules
• Measurement of gains/losses: trading book v banking book, GC v specials, securities lending
• Does it matter if collateral is HFT, AFS & HTM?
• Trading date or settlement date accounting
• Sample accounts
• Accounting for synthetics
• Netting rules
• Application of recognition/recognition rules
• Measurement of gains/losses: trading book v banking book, GC v specials, securities lending
• Does it matter if collateral is HFT, AFS & HTM?
• Trading date or settlement date accounting
• Sample accounts
• Accounting for synthetics
• Netting rules
10.15 Break
10.30 Triparty repo and securities lending
Fouad Estephan, Euroclear SA/NV
• Risk mitigation through triparty repo
• Functional aspect of triparty repo
• Legal aspect of triparty
• Triparty Securities Lending
• The triparty landscape
Fouad Estephan, Euroclear SA/NV
• Risk mitigation through triparty repo
• Functional aspect of triparty repo
• Legal aspect of triparty
• Triparty Securities Lending
• The triparty landscape
11.45 CCP for repo
Nigel Bradley, LCH
• The role of CCP in the repo market
• The structure and operation of CCP
• Regulatory mandates
• Legal relationship with users
• The role of CCP in the repo market
• The structure and operation of CCP
• Regulatory mandates
• Legal relationship with users
12.45 Lunch
13.30 GMRA & GMSLA documentary issues
Tracy Dilks, Dilks-Smith Limited
• Documentary issues • Role of negotiation
• Case study
• Mini close-out
14.30 Regulatory Overview
Richard Comotto, ICMA Centre at Reading University
• Basel risk-weighted capital
• Leverage Ratio
• LCR
• NSFR
• SFTR, CSDR, MiFID/MiFIR
15.30 Close of course
