IMN: CCPs not quite central to sec lending plans
05 February 2016 Phoenix, Arizona
Image: Shutterstock
A conference audience poll found that 63.9 percent of attendees believe that central counterparties (CCPs) will account for just 5 percent of securities lending transactions by 2017.
The poll, taken during a panel discussion at IMN's Beneficial Owners' International Securities Lending & Collateral Management Conference, found that the remaining audience members believe the market share would be between 5 to 20 percent (33.3 percent) or 20 to 50 percent (2.8 percent). The higher percentages didn't receive any votes.
“We are six or seven years on [from the start of the CCP debate] and we haven’t had a viable option. There is an attractiveness to the model but the right model hasn’t been built yet,” said Mark Skowron of Northern Trust.
Peter Economou of eSecLending added: “There are benefits for the agent lender and the borrower but until you can go to the beneficial owner and show them there are benefits CCPs will struggle to gather steam.”
Skowron offered a possible solution, stating: “Maybe general collateral should be priced more aggressively to help the beneficial owner see a benefit to the CCP.”
Phillip Todd of BlackRock came out in favour of the CCP model during a later panel, claiming: “There is a lot more meat being put on the bones of CCPs and a lot will be finalised in 2016.”
BlackRock and Morgan Stanley, meanwhile, have invested heavily in exploring the CCP model and their representatives on the panel were sure that their use in the securities lending marketplace would increase.
Another panellist also raised the point that, as counterparty risk weighting becomes a more prominent consideration in securities lending, the use of CCPs by borrowers may mitigate this potential issue and make the borrower more attractive to a beneficial owner.
The poll, taken during a panel discussion at IMN's Beneficial Owners' International Securities Lending & Collateral Management Conference, found that the remaining audience members believe the market share would be between 5 to 20 percent (33.3 percent) or 20 to 50 percent (2.8 percent). The higher percentages didn't receive any votes.
“We are six or seven years on [from the start of the CCP debate] and we haven’t had a viable option. There is an attractiveness to the model but the right model hasn’t been built yet,” said Mark Skowron of Northern Trust.
Peter Economou of eSecLending added: “There are benefits for the agent lender and the borrower but until you can go to the beneficial owner and show them there are benefits CCPs will struggle to gather steam.”
Skowron offered a possible solution, stating: “Maybe general collateral should be priced more aggressively to help the beneficial owner see a benefit to the CCP.”
Phillip Todd of BlackRock came out in favour of the CCP model during a later panel, claiming: “There is a lot more meat being put on the bones of CCPs and a lot will be finalised in 2016.”
BlackRock and Morgan Stanley, meanwhile, have invested heavily in exploring the CCP model and their representatives on the panel were sure that their use in the securities lending marketplace would increase.
Another panellist also raised the point that, as counterparty risk weighting becomes a more prominent consideration in securities lending, the use of CCPs by borrowers may mitigate this potential issue and make the borrower more attractive to a beneficial owner.
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