IMN Austin: beneficial owners slow to change
28 January 2014 Austin
Image: Shutterstock
Technology and legal requirements have come on in leaps and bounds since the 1990s, but beneficial owners are not taking advantage of new processes available to them, according to panellists at the IMN conference.
The first panel of the 20th Beneficial Owners' International Securities Lending Conference in Austin went back to the 1990s, with Mark Payson of Brown Brothers Harriman explaining how the decade saw the rise of the specials market, and many large fund companies driving the securities lending product to the forefront of the market.
Craig Starble of eSecLending agreed that this was when lending shifted from the back office to the front, and business became more akin to an investment product.
Susan Peters of Scorpeo Asset Management reminisced about the days when contracts were often just one page: there were no accounting rules; and indemnification was achieved by simply saying one was. But, she added, things have changed for the better. Large lenders that had the resources to run these programmes began to develop their own risk methodologies, and now there is better risk allocation and better legal definition of how the process works.
But the most reluctant to change were the beneficial owners. Payson said that despite the industry having more products and more participants, there are still owners that are choosing options that are conservative, and "a little outdated".
Moving towards 2000, John Arnesen of BNP Paribas Securities Services, moderator of the discussion, asked panellists to specify the significant timings when technology began to really make a difference.
James Templeman of BlackRock indicated that it was in 2002 when things really began to hot up, what with the advent of EquiLend and its AutoBorrow solution. "Clearly, technology provided scale. Hedge funds were growing rapidly, and the industry collectively realised technology had to keep up. We had no real operational automation behind the scenes. EquiLend's AutoBorrow changed the complexion of the trading desk ... its advent took a lot of heavy lifting away from the traders.”
The first panel of the 20th Beneficial Owners' International Securities Lending Conference in Austin went back to the 1990s, with Mark Payson of Brown Brothers Harriman explaining how the decade saw the rise of the specials market, and many large fund companies driving the securities lending product to the forefront of the market.
Craig Starble of eSecLending agreed that this was when lending shifted from the back office to the front, and business became more akin to an investment product.
Susan Peters of Scorpeo Asset Management reminisced about the days when contracts were often just one page: there were no accounting rules; and indemnification was achieved by simply saying one was. But, she added, things have changed for the better. Large lenders that had the resources to run these programmes began to develop their own risk methodologies, and now there is better risk allocation and better legal definition of how the process works.
But the most reluctant to change were the beneficial owners. Payson said that despite the industry having more products and more participants, there are still owners that are choosing options that are conservative, and "a little outdated".
Moving towards 2000, John Arnesen of BNP Paribas Securities Services, moderator of the discussion, asked panellists to specify the significant timings when technology began to really make a difference.
James Templeman of BlackRock indicated that it was in 2002 when things really began to hot up, what with the advent of EquiLend and its AutoBorrow solution. "Clearly, technology provided scale. Hedge funds were growing rapidly, and the industry collectively realised technology had to keep up. We had no real operational automation behind the scenes. EquiLend's AutoBorrow changed the complexion of the trading desk ... its advent took a lot of heavy lifting away from the traders.”
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