News

It is often with great trepidation that managers begin the process of replacing a legacy system. One of the reasons that large trading system migration projects often run into trouble is they typically occur at 10-15 year intervals. Because they are not common projects, many executives tend to underestimate the complexity of changing their securities lending business systems, believing that project teams from others areas of the organisation will be able to manage the change. The project team needs people …

Generating additional revenue in the securities financing business which is rapidly homogenising has become much harder especially in a period when risk and compliance are the primary questions in developing any piece of business. In some cases banks which have Agent Lending, Principle Equity Finance and Repo Desks might be missing an opportunity to enhance overall firm wide returns by leveraging trading opportunities between internal desks. It is often the case that for historical and obvious P&L reasons each business …

The process of counterparty selection and assessment has changed dramatically over the last few years.  When I first started in this industry counterparties were almost selected on the basis that they were active and had demand or supply.  For many years, once the business drivers were identified a simple check of a counterparty’s credit rating was sufficient.  Approval was given based on a rating and a volume or revenue number and once business has begun a downgrade was often the …

Regulators and commentators frequently describe our market as opaque and to a degree I have to agree. We are reticent (perhaps understandably) to publicly disclose strategies, fee share, even loan values to the broader market. Consequently, outsiders to the market find information difficult to come by. The industry has improved the level of transparency to the underlying schemes and investors that provide their assets for lending. In this space, there has been a significant improvement in reporting over the last …

There was an interesting survey reported in the last edition of the FT.  I know, I know; ‘interesting’ and ‘survey’ don’t belong in the same sentence – how many times have you turned on the news to be told an interesting survey has been published that reveals something banal and that your granny has always told you anyway?  No, this one actually sounded interesting and although I haven’t seen the detailed results,  even just the two headline conclusions reported by …

The sheer volume of likely regulatory change on its way suggests that participation in securities lending is going to become more complex and costly.  At the same time lower levels of leverage in the system probably mean hedge fund demand for flow business will remain subdued and dividend arbitrage is likely to reduce, as tax regimes harmonise (although it feels like that’s been said for years!)  So where can lenders look for new revenue opportunities? It’s a dilemma and one …

On November 18th the Financial Stability Board (FSB) published a series of papers proposing policies for shadow banking. One paper is specifically on securities lending, but some of the other papers may also have an impact on our industry. The FSB are developing these policy recommendations following an agreement of the G20 to “strengthen oversight and regulation of shadow banking”. The policies will inform global regulation going forward and so are likely to have a profound effect on the market …