Securities lending no longer ‘closed secret door’
11 March 2019 Sydney
Image: Shutterstock
Securities lending is “no longer that closed secret door where everyone is trying to get one up on everyone else,” said one panellist at this year’s PASLA/RMA conference when discussing borrower and lender relationship in securities lending.
According to the panellist, “we are here to work together because we are all out to build a business”.
The moderator then asked the panel: “As a borrower, you may have experienced some layers between yourself and a lender, are you seeing more demand in terms of information and pricing and a bit more awareness in general?”
One panellist commented: “Over the last ten years on the prime brokerage side, and on the securities lending side, in particular, has developed from that middle-back office function to a fully fledged trading product on the trading floor.”
“Both sides [borrower and lender] need to understand each other and make sure that what is actually agreed is best for both sides; if one side doesn’t understand that then that is not going to be good for the transaction.”
The speaker continued: “We are constantly out there looking to educate and share and provide information to people. We will speak to people directly and we have those conversations not just in Australia but globally.”
Another speaker added: “None of us want securities lending to impact the core investment activities.”
The moderator also asked panellists: “Looking at the role of borrowers, is there a trend in Australia or anything unusual happening compared to the rest of the world?”
One speaker replied: “Based on demand, Australia is a developed market and is no different to the US, UK, Japan or Hong Kong in that sense. The hedge fund community is extremely developed down here from a longshore angle. Australia does have some specific corporate actions down here, however, which are different.”
“From a prime brokerage borrower perspective, we are looking for stable cheap easy-to-find demand. We are looking for a borrower who is long term in the programme.”
Another panellist added: “Australia does have some nuances but this is nothing that we don’t see in other parts of the globe. We know that environmental social and governance is becoming a bigger part of the globe, and governance in particular impacts securities lending down here.”
“As a borrower, I would want stable stock but we do see more of a preference for the stock to be recalled for specific trades.”
“What we are looking for is a breadth of supply and an understanding of why we are borrowing a stock so that we have more of a stable lending programme down here.”
According to the panellist, “we are here to work together because we are all out to build a business”.
The moderator then asked the panel: “As a borrower, you may have experienced some layers between yourself and a lender, are you seeing more demand in terms of information and pricing and a bit more awareness in general?”
One panellist commented: “Over the last ten years on the prime brokerage side, and on the securities lending side, in particular, has developed from that middle-back office function to a fully fledged trading product on the trading floor.”
“Both sides [borrower and lender] need to understand each other and make sure that what is actually agreed is best for both sides; if one side doesn’t understand that then that is not going to be good for the transaction.”
The speaker continued: “We are constantly out there looking to educate and share and provide information to people. We will speak to people directly and we have those conversations not just in Australia but globally.”
Another speaker added: “None of us want securities lending to impact the core investment activities.”
The moderator also asked panellists: “Looking at the role of borrowers, is there a trend in Australia or anything unusual happening compared to the rest of the world?”
One speaker replied: “Based on demand, Australia is a developed market and is no different to the US, UK, Japan or Hong Kong in that sense. The hedge fund community is extremely developed down here from a longshore angle. Australia does have some specific corporate actions down here, however, which are different.”
“From a prime brokerage borrower perspective, we are looking for stable cheap easy-to-find demand. We are looking for a borrower who is long term in the programme.”
Another panellist added: “Australia does have some nuances but this is nothing that we don’t see in other parts of the globe. We know that environmental social and governance is becoming a bigger part of the globe, and governance in particular impacts securities lending down here.”
“As a borrower, I would want stable stock but we do see more of a preference for the stock to be recalled for specific trades.”
“What we are looking for is a breadth of supply and an understanding of why we are borrowing a stock so that we have more of a stable lending programme down here.”
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