IHS Markit reports $907m in July securities lending revenue
10 August 2020 London
Image: Fer Gregory / Shutterstock.com
Global securities lending returns for July increased 1.4 percent year-on-year (YoY), with US equity lending doing most of the heavy lifting and European equities returning to form, according to IHS Markit.
IHS Markit revealed its securities lending report for July that revenue hit $907 million.
July was the first month of 2020 to see a YoY increase in European equity lending revenue, it totalled $142 million, a 21 percent uptick from the same period in 2019.
A handful of equity specials also contributed to YoY revenue growth, reports IHS Markit, with German equity revenues continuing to be robust despite Wirecard no longer taking the lead spot on the top revenue-generating securities.
Deutsche Lufthansa and Varta were among the top 20 highest-revenue generating securities in July and combined for 48 percent of German equity lending revenue.
Across the pond, Americas equity revenues came in at $396 million, a 22 percent YoY increase, but a slight decrease from the explosive month in June, where US equities saw a $437 million revenue, 25 percent YoY growth.
Canadian equity lending chalked up $39 million in July revenue, a 33 percent YoY decline compared. Revenue was also down 15 percent compared to June.
In Asia, the largest market, Japan, saw equities deliver $44 million in July revenue, broadly in line with the Q2 average monthly return; Year-to-date revenues of $347 million reflect a 25 percent YoY decline.
Hong Kong equity lending revenue has been steady at just over $30 million per month since May, with July revenues of $31.2 million reflecting a 31 percent YoY increase.
Australia equity returns for July declined by 16 percent, entirely the result of lower on-loan balances, while average fees have shown a YoY increase for each month since April, says IHS Markit.
The short sale ban in South Korea has limited lending revenue, with $14.9 million in July with revenue being the lowest for any month of 2020 and reflecting a 54 percent YoY decline.
The ban is currently set to be in place until October but is up for review later this month, with an extension still a real possibility.
A substantial portion of the demand for the most revenue generating securities was driven by
arbitrage trades of various types.
“After a challenging period for many equity short sellers from April to June, high-fee US equities
underperformed relatively easy to borrow shares in July, generally a boon to long-short equity
strategies,” says IHS Markit’ securities finance director, Sam Pierson.
“Although global securities finance revenues increased 1.4 percent YoY in July,the trend is to the downside, with utilisation steadily falling since March, reinvestment returns declining and US equity special balances heading back toward baseline trend after Q2 surge,” he explains.
Some of the key H1 drivers of lending revenues may be fading in Q3, however the reversals of trend have been rapid in 2020.
IHS Markit revealed its securities lending report for July that revenue hit $907 million.
July was the first month of 2020 to see a YoY increase in European equity lending revenue, it totalled $142 million, a 21 percent uptick from the same period in 2019.
A handful of equity specials also contributed to YoY revenue growth, reports IHS Markit, with German equity revenues continuing to be robust despite Wirecard no longer taking the lead spot on the top revenue-generating securities.
Deutsche Lufthansa and Varta were among the top 20 highest-revenue generating securities in July and combined for 48 percent of German equity lending revenue.
Across the pond, Americas equity revenues came in at $396 million, a 22 percent YoY increase, but a slight decrease from the explosive month in June, where US equities saw a $437 million revenue, 25 percent YoY growth.
Canadian equity lending chalked up $39 million in July revenue, a 33 percent YoY decline compared. Revenue was also down 15 percent compared to June.
In Asia, the largest market, Japan, saw equities deliver $44 million in July revenue, broadly in line with the Q2 average monthly return; Year-to-date revenues of $347 million reflect a 25 percent YoY decline.
Hong Kong equity lending revenue has been steady at just over $30 million per month since May, with July revenues of $31.2 million reflecting a 31 percent YoY increase.
Australia equity returns for July declined by 16 percent, entirely the result of lower on-loan balances, while average fees have shown a YoY increase for each month since April, says IHS Markit.
The short sale ban in South Korea has limited lending revenue, with $14.9 million in July with revenue being the lowest for any month of 2020 and reflecting a 54 percent YoY decline.
The ban is currently set to be in place until October but is up for review later this month, with an extension still a real possibility.
A substantial portion of the demand for the most revenue generating securities was driven by
arbitrage trades of various types.
“After a challenging period for many equity short sellers from April to June, high-fee US equities
underperformed relatively easy to borrow shares in July, generally a boon to long-short equity
strategies,” says IHS Markit’ securities finance director, Sam Pierson.
“Although global securities finance revenues increased 1.4 percent YoY in July,the trend is to the downside, with utilisation steadily falling since March, reinvestment returns declining and US equity special balances heading back toward baseline trend after Q2 surge,” he explains.
Some of the key H1 drivers of lending revenues may be fading in Q3, however the reversals of trend have been rapid in 2020.
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