IMN: Securities finance revenues outperform for 2022
14 September 2022 UK
Image: Jennifer/stock.adobe.com
Securities lending is predicted to face “a very good year” for everybody engaged in securities lending, according to a panel at the IMN European Beneficial Owners’ Securities Finance & Collateral Management Conference held in London.
As part of the conference, Standard Chartered’s global head of securities lending Sunil Daswani hosted “The State of the European Securities Finance Market” panel.
The session heard from James Day, UK head of securities finance and global head of product development at State Street, Craig Starble, CEO at eSecLending, and Matthew Chessum, director of securities finance at S&P Global Market Intelligence.
In addition, the panel included Joseph Gillingwater, global head of fixed income agency lending trading at Northern Trust, and Remy Ferraretto, senior sales for securities finance and repo at CACEIS Bank.
Opening the discussion, S&P Global Market Intelligence’s Chessum said that the first half of 2022 had seen the best performance since 2008 in terms of securities finance revenues, with this performance continuing into the second half of 2022.
Reflecting on the future state of securities lending, eSecLending’s Starble said: “Collateral flexibility is always a good place to start when you are looking at enhancing returns within a risk-adjusted construct. Those clients who have a more expansive collateral profile are going to outperform from a revenue perspective.
“Those clients who are actively involved with their agent lender — such as being very diligent on corporate action events and elections — are going to outperform if they have the same assets as clients who do not get involved.”
Starble continued: “It is more of a communication and execution strategy that really works out well. I think that is the message going forward, to continue to look at new ways, because of capital constraints on the borrower and agent lender side these days, there are going to be all sorts of trade structures brought to clients for their approval. For those who choose to analyse it, understand it and move forward, they are going to outperform in that particular sector.”
Despite the positive outlook for the securities lending sector, S&P Global Market Intelligence’s Chessum highlights that heightened market volatility is a concern that beneficial owners need to be aware of, as it could lead to greater mark-to-markets.
He explains: “You have got to be aware of a fund's collateral movements and make sure that you are doing the correct oversight management on the collateral positions that you are holding — making sure that they are in line with your collateral policy and that the valuations are correct.”
Chessum concludes: “Mark-to-markets movements are likely to be bigger going into the second half of the year as market volatility continues.”
As part of the conference, Standard Chartered’s global head of securities lending Sunil Daswani hosted “The State of the European Securities Finance Market” panel.
The session heard from James Day, UK head of securities finance and global head of product development at State Street, Craig Starble, CEO at eSecLending, and Matthew Chessum, director of securities finance at S&P Global Market Intelligence.
In addition, the panel included Joseph Gillingwater, global head of fixed income agency lending trading at Northern Trust, and Remy Ferraretto, senior sales for securities finance and repo at CACEIS Bank.
Opening the discussion, S&P Global Market Intelligence’s Chessum said that the first half of 2022 had seen the best performance since 2008 in terms of securities finance revenues, with this performance continuing into the second half of 2022.
Reflecting on the future state of securities lending, eSecLending’s Starble said: “Collateral flexibility is always a good place to start when you are looking at enhancing returns within a risk-adjusted construct. Those clients who have a more expansive collateral profile are going to outperform from a revenue perspective.
“Those clients who are actively involved with their agent lender — such as being very diligent on corporate action events and elections — are going to outperform if they have the same assets as clients who do not get involved.”
Starble continued: “It is more of a communication and execution strategy that really works out well. I think that is the message going forward, to continue to look at new ways, because of capital constraints on the borrower and agent lender side these days, there are going to be all sorts of trade structures brought to clients for their approval. For those who choose to analyse it, understand it and move forward, they are going to outperform in that particular sector.”
Despite the positive outlook for the securities lending sector, S&P Global Market Intelligence’s Chessum highlights that heightened market volatility is a concern that beneficial owners need to be aware of, as it could lead to greater mark-to-markets.
He explains: “You have got to be aware of a fund's collateral movements and make sure that you are doing the correct oversight management on the collateral positions that you are holding — making sure that they are in line with your collateral policy and that the valuations are correct.”
Chessum concludes: “Mark-to-markets movements are likely to be bigger going into the second half of the year as market volatility continues.”
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