Securities finance industry dynamics changing - SunGard
14 September 2011 London
Image: Shutterstock
The securities lending market is punctuated by increased scrutiny from regulators and clients, as well as changing dynamics in hedge fund operation, writes SunGard in a recent report.
"The securities finance industry continues to transform in the midst of a slow economic recovery and impending new regulations. Customers are demanding greater transparency, consolidating systems to increase efficiency and reduce costs and improving their processes in order to better leverage their securities finance business," said Jane Milner, head of strategy for securities finance and collateral management in SunGard's Capital Markets business.
Of ten identified trends in the industry, one is that hedge funds are sitting long, traditional long-only asset holders are creating hedge funds and proprietary desks are being spun off.
"As a result, market participants are seeking ways to service these 'morphed' entities," it adds.
Meanwhile, the industry is also facing greater scrutiny from regulators around the world resulting in demands for increased transparency, tighter controls over short selling, more visible contingency planning for times of increased stress and higher capital allocations for each business line.
"The increasing emphasis on transparency is leading large global players to demand cross-geography, cross-product and cross-organisational views of key data in order to better manage their risk and leverage assets," writes SunGard.
These pressures are being felt not just from regulators, but also from clients, which are demanding hard numbers to justify the costs and risks associated with securities lending business.
Taking centre stage, says SunGard, is the use of collateral management as a tool to mitigate risk and manage liquidity - firms are recognising the additional revenue generation opportunities that this provides for both their organisations and clients.
"The securities finance industry continues to transform in the midst of a slow economic recovery and impending new regulations. Customers are demanding greater transparency, consolidating systems to increase efficiency and reduce costs and improving their processes in order to better leverage their securities finance business," said Jane Milner, head of strategy for securities finance and collateral management in SunGard's Capital Markets business.
Of ten identified trends in the industry, one is that hedge funds are sitting long, traditional long-only asset holders are creating hedge funds and proprietary desks are being spun off.
"As a result, market participants are seeking ways to service these 'morphed' entities," it adds.
Meanwhile, the industry is also facing greater scrutiny from regulators around the world resulting in demands for increased transparency, tighter controls over short selling, more visible contingency planning for times of increased stress and higher capital allocations for each business line.
"The increasing emphasis on transparency is leading large global players to demand cross-geography, cross-product and cross-organisational views of key data in order to better manage their risk and leverage assets," writes SunGard.
These pressures are being felt not just from regulators, but also from clients, which are demanding hard numbers to justify the costs and risks associated with securities lending business.
Taking centre stage, says SunGard, is the use of collateral management as a tool to mitigate risk and manage liquidity - firms are recognising the additional revenue generation opportunities that this provides for both their organisations and clients.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
