Symposium: Liquidity is key in securities lending
06 November 2020 UK
Image: Zffoto/Adobe Stock
One of the main messages to come from the liquidity panel from the SLT Securities Finance Technology Symposium is that liquidity is key in securities lending.
The panel discussed how liquidity is as much of an issue of quality and a question of efficient use of assets as the raw total of inventory available to lend.
New and established venues to access equities and fixed income securities are constantly improving to meet that challenge, but looming issues such as the Central Securities Depository Regulation threaten to undermine their efforts.
Panel moderator Gabriele Frediani, independent advisor at ZBO International, explained there are many drivers pushing overall liquidity and the movement and use of collateral upwards.
Kicking off this conversation, Guido Stroemer, CEO of HQLAᵡ said that his firm’s tagline is ‘to accelerate collateral capability’, but added that what the platform actually does is “improve the utility of assets without actually moving them”.
“We are also working with our clients to expand the type of assets that can be used, we are looking to expand asset classes into money fund units,” Stroemer explained. “We are also providing our clients with the capability to transact at very specific lengths of time. Lastly, we are also expanding the time horizon for which ownership can take place. Liquidity is important but it is also important to judge the type of liquidity, and judge volume and provide the market with different ways to raise liquidity.”
Weighing in on this, David Raccat, CEO and founder of Wematch.Securities Financing, highlighted that liquidity is one of the immediate ways to measure the efficiency of the market.
In this particular space, Frediani noted that the measurement of volume is not really creating as much liquidity as taking it from somewhere then moving it to somewhere else.
Raccat responded: “Platforms, volumes and trades are definitely important. You have to start somewhere and to get that liquidity and it is extremely important to sit down with the user and find out where you can bring value.”
Stroemer commented: “As we [HQLAᵡ] move forward in our product innovation, we are very keen on finding clients’ pain points and creating value and efficiencies for clients. You can do this by listening to your clients and helping them identify different pain points and then solutions to help them deal with those pain points.”
The moderator then pointed to one problem coming from repo, saying that electronic trading comes from commoditisation and working down. He queried the panel on whether it is fair to compare how you manage equities and fixed income.
Mike Norwood, global product owner, trading, at EquiLend, suggested that comparisons can be drawn in terms of loan balances and inventory in the fixed income space and can be seen on par.
“Trades being made off platform, things being approved over email or a phone call can cause inefficiencies,” he added. “When you look at the regulatory impact, all of the manual entry processing those traders create can cause an opportunity for a break. If it is executed via an electronic trading platform then for everything else it is additional cost and noise that reduces efficiency of trade.”
Raccat affirmed: “The really interesting part is the journey from onboarding to adoption and then the ultimate goal is to go into addiction.”
“Addressing risks one by one and going into a digital solution is important and then you get the onboarding done. This has been done now with most of the players in the industry.”
He added: “Adoption is the second pillar; trying to sit down with the users and understand their workflow and trying to identify where the trader is losing a lot of time is a step that must be taken.”
“Once you have completed adoption then the fun part begins. Get a trader who can turn the heat up into addiction to make sure it is completely embedded in your day-to-day workflow and activity. The whole liquidity issue is obviously inherent in everything we do.”
“The more we have efficiency the more we have liquidity.”
The panel discussed how liquidity is as much of an issue of quality and a question of efficient use of assets as the raw total of inventory available to lend.
New and established venues to access equities and fixed income securities are constantly improving to meet that challenge, but looming issues such as the Central Securities Depository Regulation threaten to undermine their efforts.
Panel moderator Gabriele Frediani, independent advisor at ZBO International, explained there are many drivers pushing overall liquidity and the movement and use of collateral upwards.
Kicking off this conversation, Guido Stroemer, CEO of HQLAᵡ said that his firm’s tagline is ‘to accelerate collateral capability’, but added that what the platform actually does is “improve the utility of assets without actually moving them”.
“We are also working with our clients to expand the type of assets that can be used, we are looking to expand asset classes into money fund units,” Stroemer explained. “We are also providing our clients with the capability to transact at very specific lengths of time. Lastly, we are also expanding the time horizon for which ownership can take place. Liquidity is important but it is also important to judge the type of liquidity, and judge volume and provide the market with different ways to raise liquidity.”
Weighing in on this, David Raccat, CEO and founder of Wematch.Securities Financing, highlighted that liquidity is one of the immediate ways to measure the efficiency of the market.
In this particular space, Frediani noted that the measurement of volume is not really creating as much liquidity as taking it from somewhere then moving it to somewhere else.
Raccat responded: “Platforms, volumes and trades are definitely important. You have to start somewhere and to get that liquidity and it is extremely important to sit down with the user and find out where you can bring value.”
Stroemer commented: “As we [HQLAᵡ] move forward in our product innovation, we are very keen on finding clients’ pain points and creating value and efficiencies for clients. You can do this by listening to your clients and helping them identify different pain points and then solutions to help them deal with those pain points.”
The moderator then pointed to one problem coming from repo, saying that electronic trading comes from commoditisation and working down. He queried the panel on whether it is fair to compare how you manage equities and fixed income.
Mike Norwood, global product owner, trading, at EquiLend, suggested that comparisons can be drawn in terms of loan balances and inventory in the fixed income space and can be seen on par.
“Trades being made off platform, things being approved over email or a phone call can cause inefficiencies,” he added. “When you look at the regulatory impact, all of the manual entry processing those traders create can cause an opportunity for a break. If it is executed via an electronic trading platform then for everything else it is additional cost and noise that reduces efficiency of trade.”
Raccat affirmed: “The really interesting part is the journey from onboarding to adoption and then the ultimate goal is to go into addiction.”
“Addressing risks one by one and going into a digital solution is important and then you get the onboarding done. This has been done now with most of the players in the industry.”
He added: “Adoption is the second pillar; trying to sit down with the users and understand their workflow and trying to identify where the trader is losing a lot of time is a step that must be taken.”
“Once you have completed adoption then the fun part begins. Get a trader who can turn the heat up into addiction to make sure it is completely embedded in your day-to-day workflow and activity. The whole liquidity issue is obviously inherent in everything we do.”
“The more we have efficiency the more we have liquidity.”
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