Open Call Report – Securities Lending; A $10b Revenue Line

STA Open Call – December 4, 2018 – Call Notes[1]

Securities Lending: A $10 Billion Revenue Line

Presenter: Bob Levy, Hanweck

Presentation HERE

 

Opening Remarks – Jim Toes, STA

Mid-term election results & possible outcomes

Senate – Republicans pick up two seats and now hold a 53 to 47 majority. This should enable President Trump to have nominees for government positions approved more easily.

House of Representatives – Rep Maxine Waters (D CA) will chair the House Financial Services Committee. It is widely believed that her priorities will be: A focus on GSE reform (Fannie and Freddie Mac); vigorous oversight over federal financial regulators and companies; and increasing investor protection by requiring more corporate disclosures on a range of topics such as; diversity of board make-up. It is expected there will be a new subcommittee on Diversity & Inclusion, as well as a possible task force on Technology & Innovation.

Second, Implementation of Rule 606 Amendments

A number of issues on the September 2019 implementation of amendments to Rule 606 have come to the attention of STA and FIF. Please submit any questions or input you may have to either STA or FIF. Our Tues, Dec 11th Open Call will be on Rule 606 with an FIF presenter

Senate Banking Hearing; Oversight of the U.S. Securities & Exchange Commission

On Dec. 11th, Senate Banking will meet in open session to conduct a hearing titled:  Oversight of the SEC. The Honorable Jay Clayton, Chairman, SEC will be the only witness. LINK.

 

Executive Summary

In the first 3 qtrs of 2018, Securities Lending activity generated $8.3 billion in revenues.

As is characteristic of markets this large, several factors beyond simple supply and demand need to exist in order to achieve this scale.

As it pertains to Securities Lending, some of these factors are found in the efficiencies in managing data; clearing transactions and capital being able to flow across asset classes and across borders. As firms and vendors look to realize these efficiencies, some are discovering alternative ways to interpret the data.

 

Hanweck Presentation Outline

Present State of Stock Lending

Alternative data on securities lending

Regulatory and Market Trends

Hanweck Borrow Intensity Indicators

Hard-to-Borrow Equities vs VIX

 

[1] This brief is meant for informational purposes only and therefore should not be considered legal advice. STA’s goal is to raise awareness on industry developments and encourage dialogue.