By Paul Taylor, Head of Operations, Loan Market Association
Welcome to the fourth edition of Challenging the Timeline – the LMA newsletter dedicated to primary and secondary operations. As we enter the second quarter, the focus here is in fact a reflection on last year and setting out some aspirations and targets for 2025. Why the lookback? The LMA collects metrics from participating institutions at the end of the previous quarter, in this case Q4. After collecting the data, the LMA consolidates it and provides market averages and medians which are posted on the LMA site.
In this edition we cover the following:
- Secondary settlement times: Q4 and a comparison
- Timeline aside
- Secondary fault-based delayed compensation
- Gearing up for change – 2025 Operations Conference
- Personal reflections
1. Secondary Settlement Times: Q4 and a Comparison
In 2024, we set an ambitious target to reduce settlement times by 25%. The market has made progress: comparing 2024 to 2023, settlement times fell by 10% (Average) and 11% (Median). While there’s more work to do, we believe the 25% goal remains achievable. Settlement times continue to trend downward, with Q4 (27.31) and Q2 (27.36) recording the 2nd and 3rd best quarterly median times since data collection began.
In hindsight, a 25% reduction in a short timeframe may have been too ambitious, given rising market volumes and increased primary and refinancing activity. That said, any improvement amid growing volumes is still a win. Some participants have already met the target, while others had a longer way to go. It’s also important not to focus on one quarter alone—Q3 2024 proved that spikes happen but tend to smooth out over the year.
2. Timeline Aside
We must continue to challenge the timeline as a community committed to improvement. Many members are already refining their processes for greater efficiency without sacrificing controls, and we encourage all impacted members to join the efforts. Both settlement and agency teams play a crucial role and rely on each other’s performance. While the trade lifecycle is broadly similar for all, we acknowledge that institutions face unique challenges to them.
This internal review must continue, alongside broader strategies to manage headwinds like increased volumes and scalability. To achieve and incentivise faster settlements, we must focus on:
- Technology: Volumes have continued to rise and members are expected the same pattern in 2025. When I started in the early 2000s, today we have excellent tech solutions to scale settlements and agency operations, allowing skilled staff to focus on high-value tasks.
- Education: Knowledge drives efficiency. With increasing volumes, hiring alone won’t bridge the experience gap. The LMA offers training, including an in-person secondary trading course. Let us know if further content would be helpful—LMA Academy has more details.
3. Secondary Fault-Based Delayed Compensation Proposal
This long-discussed concept has been on the table for years and personally I have been in a lot of meeting to discuss whether European market should adapt. A quick recap:
Delayed compensation rules, introduced 20 years ago, ensure buyers are compensated for delays beyond their control. Buyers receive the same economic benefit as if they became the lender of record at trade date +10 business days (par/near par) or +20 business days (distressed). Isn’t it much fairer to expect a certain level of commitment from the buyer (and the seller) to incentivise settlement? Secondary fault-based delayed compensation does exactly that; should either party not meet their obligations on a timely basis, then this proposal will impact that party.
LMA has a working group dedicated to this topic and we are refining proposals and gaining strong market support from members. If you’d like to contribute to making our markets more efficient, get in touch!
4. Gearing Up for Change – 2025 Operations Conference
This is the theme for our upcoming conference on 10 July 2025. Join us as we explore market dependencies and collaborative efforts to improve settlement times. More details will be available on the LMA website soon.
5. Personal Reflections
2024 was a B- at best for me as I had high ambitions for my first year at the LMA. However, there was a lot of learning and personal development throughout the year, which will only make 2025 a stronger year. Having been in the market for a long time ,time, I understand that Rome was not built in a day and am excited to continue working with members to make our markets more liquid and efficient over the course of 2025. My aspirations are ambitious, and I need good partners within the market to achieve our member-driven goals; thankfully there are plenty of such members in the EMEA loans market, and I’m already working with many of you.
