This edition provides HSBC’s perspective of the equity and fixed income markets over the past six months, alongside ISLA’s commentary on the Securities Financing Transactions Regulation data reported to trade repositories.
Among the market highlights, the report finds that the securities available for loan in global securities lending markets hit a new high of €32 trillion in December 2021, an increase from €28 trillion seen six months prior in June 2021.
Aggregate securities on loan also rose to a record €2.7 trillion in December, up from €2.6 trillion in June.
For equities lending, securities on-loan topped €1.1 trillion, remaining consistent from its June 2021 figure. However, lendable assets reached €24 trillion in December 2021, an increase from €20 trillion in June 2021.
Trends from last year saw equity markets become ‘bullish’ on central bank policy and emerging markets face turbulence from COVID-19, which created event and directional opportunities for many in the lending market, according to the report.
Adnan Hussain, global head of securities lending at HSBC Markets & Securities Services, says: “As equity markets have risen to all-time highs, it has become easier for banks to fund trades within existing collateral sets, meaning many securities financing participants are now looking to pledge collateral further down the credit curve to facilitate a higher internal benefit.”
Hussain notes that collateral providers have turned to American Depositary Receipts, exchange-traded funds, investment-grade and sub-investment grade credit, which have seen high volume and depth of issuance since the pandemic began.
In discussing SFTR data, ISLA states that SFTR is by no means a completed project with new schema and validation rules introduced this year.
As borrowers adjust to the changing prudential capital environment, a further expediential growth in pledge collateral arrangements is expected. In the latest period, both EU and UK trade repositories data suggests that the level of security interest transactions was between 13 per cent and 16 per cent in both markets.
ISLA’s triparty member firms have also seen this pattern of growth in pledge collateral arrangements in the last year. Data tracked through the triparty members’ own collateral management platforms suggest that security arrangements over collateral account for around 18 per cent, or approaching one in five of all collateral transactions held in their systems.
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