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Item 1 – Presentation on ELAC Online Portal
ACI Financial Markets Association made a presentation to the committee on their ELAC online portal. The ELAC online portal is seven years old and has three codes: the FX global code, the global price market code and the UK money market code. The presentation focused on how the ELAC portal gives market participants a framework to demonstrate and communicate that all staff are up-to-date with the latest codes, global standards and best practice guidelines applicable to their industry and role.
Item 2. Introduction
The Co-Chairs welcomed everyone to a virtual meeting of the UK Money Market Code Sub-Committee.
Item 3. Minutes of last meeting
The co-chairs noted that the minutes of the last meeting were published on the Bank’s website.
Item 4. Failed Trade
Repo fails
It was noted that settlement efficiency increased (97%) in the period between May and early September. In the last two weeks of September and early October, the gilt repo volume increased significantly and the increase in default levels corresponded to the increased volume. Since the date of the last meeting Euroclear has made several changes to support the market and these include a permanent extension to the CREST diary by extending the DVP settlement window. Additionally, Auto Splitting is scheduled to go live on 21 November 2022. No more problems with the CREST system.
Securities lending fails
The results of an informal monthly survey (covering the period 2019 to present) of some large institutions with respect to ‘failures’ for securities lending transactions were published. This indicates a high level of settlement rate for open leg trades, with settlement rates ranging between 95% and 97%. On the other hand, settlement rates for closing lag trades are quite poor, typically in the 85% range for both equities and fixed income. The introduction of the Central Securities Depositories Regulation (CSDR) has improved the settlement rate for return lag trades in equities by up to 90%. On the other hand, settlement rates for fixed income have continued to decline this year and currently stand at 79% (based on aggregate figures for government and corporate bonds). The biggest reasons for the return lag failure are fixed income due to non-availability of stocks to return to brokers (in the equity space) and liquidity in the corporate bond market. Data obtained from the ECB website shows settlement rates for TARGET2-securities (T2S) at around 93%-95% in both value and volume during the period January to June 2022. The committee agreed to monitor settlement rates and also noted that it was open to setting up a small working group to examine the issue further. It was generally agreed that such weak settlement discipline was not acceptable.
Item 5: Diversity and Inclusion (D&I).
D&I at ISLA
The committee was given an overview of the work ISLA is doing in the area of diversity and inclusion, noting that currently the association’s D&I activities focus on working with partner associations, such as the Women in Finance group. ISLA is looking to accelerate its activities in the area of diversity and inclusion and is thus looking to broaden its approach to D&I and assess engagement with relevant groups. It was also noted that ISLA is in the early stages of this comprehensive D&I strategy which will be driven by the board and members and will therefore have more to report back to at future meetings.
Effect of return to office
It was suggested that it was too early to assess the impact of working from home on D&I, as different working from home models are in flux and also due to lack of data. Data on gender metrics over a 5-year period show a slower than expected change in D&I which may be due to the epidemic. Perhaps a more deliberate approach that provides support, sponsorship, and advocacy to move more diverse candidates through the pipeline to middle and senior levels, where numbers are significantly declining, is needed. Further work will be done by external organizations to develop data to flesh out some of the issues in this area. It was noted that change would be difficult to achieve without data and targets.
It was suggested that perhaps the committee should commission a working group to look into D&I in money markets and come up with recommendations to help transform money markets and ensure momentum is maintained. It was also noted that the 2022 McKinsey report on ‘Women in the Workplace’ shows a recent increase in attrition rates for mid- and senior-level women.
Item 6. Agreeing to the text of the commitment letter statement
In light of recent breaches of the Money Market Code, continued failures in the money market, and the need to maintain momentum on diversity and inclusion among trading teams of market participants, the Committee agreed at its meeting in May 2022. To remind all signatories of the Code of their obligations. The Co-Chairs and the Bank now wish to ensure that there is full agreement with the proposed text of the letter. One committee member suggested that paragraph 3 (which covers diversity and inclusion and work from home) be split into two separate paragraphs. Another committee member suggested further drafting changes that would be shared with the committee secretariat. When the letter is finalised, it will be sent to the signatories of the Money Market Code.
Item 7. AOB
AOB is not.
Committee members
Participants (Virtual)
Kim Winding Larsen (President), ELAC Online Portal – Invited to give a presentation on ACI FMA
Rui Correa (Executive Director and Chairman of the Board of Education), invited to give a presentation on ELAC Online Portal – ACI FMA
Gordon Lawson – Aberdeen Standard Investments
James Winterton – Association of Corporate Treasurers
Tim McLeod – Blackrock
Ina Budh-Raja (Co-Chair) – BNY Mellon
John Edwards – CME Group
Louis Sinclair – DMO (Supervisor)
Chris Mundy (invited to give a presentation on Repo Fails) – Euroclear
Jan Grells – Euroclear
Vicky Worsfold – Guildford Borough Council
Andy Green – Hoare & Co / LMMA
Glen Handley (Co-Chairman) – HSBC
James McKerrow – Insight Investments
Veronica Iommi – IMMFA
Julie Jo – IMMFA
Andy Dyson – ISLA
Tina Baker – ISLA – Invited to give a presentation D&I at ISLA
Mike Jones – LCH
Bola Tobun – London Borough of Enfield
Terry Barton – Across the Country
Nic Erevik – Newcastle Building Society
Bank of England
John Pizer
David Glenville
Kpakpo Brown
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