Quadriserv posts 2011 sec lending highlights
13 January 2012 London
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Quadriserv has released the rebate rates of some of the hottest stocks in 2011.
On a daily volume weighted average (VWA), Evergreen Solar traded in the tightest range between some 84 and 99 bps while AutoChina International saw its negative rebate rate range from around 21,000 to 930 bps throughout the year, the widest gap of the specials reported.
However, it should be noted that the massive demand implied by AutoChina's rebate rate could be influenced by a range of factors, such as how many shares are in free float, the size of the trades completed, what kind of collateral might have been accepted for the trade and timing.
David Lewis, SVP at SunGard Astec Analytics, expects such a trade likely occurred when an SEC investigation into the company's dealings heated up over allegations of fraud and overvaluation. His figures show a peak average rebate rate over the last 12 months of 8800 bps, still a substantial figure. Over the year, the company's share price fell some 20 per cent, but in September it had seen a plunge of between 60 and 70 per cent, recovering somewhat later in the year.
“It is not unreasonable to see a very expensive rebate going through when things like that are happening, but it could have been a tiny trade...It may well be that a stock peaked at such a rebate, but without contextual data such as loan volumes for example, such values could be misleading,” Lewis said.
He adds that rebates in a tight range often point to general sentiment about a sector under consistent downward pressure. The solar industry for example, faced headwinds when the US and European governments started to cut subsidies, bringing into question the viability of business models.
Noting that understanding the factors influencing rebate rates is important, Tim Keenan, head of sales for AQS, Quadriserv's automated securities lending trading platform from which the data is pulled, adds that as a reference price and comparison, the figures provide powerful information to the industry for any security traded.
"Seeing the highest and lowest rebates over the day may force someone to look at where they have the stock and compare it to the market. That could make trading on the platform advantageous to lenders if they can get a better price than in a bilateral trade. You can also compare your current borrow rates to where those same stocks traded on the platform," he says.
The most actively traded ETF by total volume was SPDR S&P 500, which traded special with a year-long VWA of 10 bps.
However, that may be because it's often traded for term and supply tends to be locked up, while a historically low interest rate environment is also changing the definition of specials which would usually only include securities of at least 20 bps or better.
FXI, the China ETF, traded the most special of the ETFs at 122 basis points.
In GC trade, the 10 most actively traded securities had rebates in a tight range from 11 to 23 bps with Bank of America seeing both the most volume and highest rebate.
In other 2011 highlights, Quadriserv announced some milestone achievements: the broker-to-broker trading venue it launched in September, AQS Direct, gained traction, processing about 50 per cent of total AQS market activity in the fourth quarter. More than 50 institutional member firms, including three of the top five and 10 of the top 15 largest prime brokers are either actively trading or in the process of connecting to the AQS marketplace.
On a daily volume weighted average (VWA), Evergreen Solar traded in the tightest range between some 84 and 99 bps while AutoChina International saw its negative rebate rate range from around 21,000 to 930 bps throughout the year, the widest gap of the specials reported.
However, it should be noted that the massive demand implied by AutoChina's rebate rate could be influenced by a range of factors, such as how many shares are in free float, the size of the trades completed, what kind of collateral might have been accepted for the trade and timing.
David Lewis, SVP at SunGard Astec Analytics, expects such a trade likely occurred when an SEC investigation into the company's dealings heated up over allegations of fraud and overvaluation. His figures show a peak average rebate rate over the last 12 months of 8800 bps, still a substantial figure. Over the year, the company's share price fell some 20 per cent, but in September it had seen a plunge of between 60 and 70 per cent, recovering somewhat later in the year.
“It is not unreasonable to see a very expensive rebate going through when things like that are happening, but it could have been a tiny trade...It may well be that a stock peaked at such a rebate, but without contextual data such as loan volumes for example, such values could be misleading,” Lewis said.
He adds that rebates in a tight range often point to general sentiment about a sector under consistent downward pressure. The solar industry for example, faced headwinds when the US and European governments started to cut subsidies, bringing into question the viability of business models.
Noting that understanding the factors influencing rebate rates is important, Tim Keenan, head of sales for AQS, Quadriserv's automated securities lending trading platform from which the data is pulled, adds that as a reference price and comparison, the figures provide powerful information to the industry for any security traded.
"Seeing the highest and lowest rebates over the day may force someone to look at where they have the stock and compare it to the market. That could make trading on the platform advantageous to lenders if they can get a better price than in a bilateral trade. You can also compare your current borrow rates to where those same stocks traded on the platform," he says.
The most actively traded ETF by total volume was SPDR S&P 500, which traded special with a year-long VWA of 10 bps.
However, that may be because it's often traded for term and supply tends to be locked up, while a historically low interest rate environment is also changing the definition of specials which would usually only include securities of at least 20 bps or better.
FXI, the China ETF, traded the most special of the ETFs at 122 basis points.
In GC trade, the 10 most actively traded securities had rebates in a tight range from 11 to 23 bps with Bank of America seeing both the most volume and highest rebate.
In other 2011 highlights, Quadriserv announced some milestone achievements: the broker-to-broker trading venue it launched in September, AQS Direct, gained traction, processing about 50 per cent of total AQS market activity in the fourth quarter. More than 50 institutional member firms, including three of the top five and 10 of the top 15 largest prime brokers are either actively trading or in the process of connecting to the AQS marketplace.
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