Finadium report: Fully Paid Lending at US Broker-Dealers

Finadium has released a new research report on fully paid securities lending programs at US retail broker-dealers. As changes in retail investment activity and financial regulation affect their industry, US brokers are looking for additional revenue streams that can serve their clients and themselves, while working to optimize upcoming rules on costs of capital and counterparty exposure. Fully paid lending continues to be a topic of significant interest.

In this report, Finadium documents the current state of fully paid securities lending programs at US retail brokers including retail-focused clearing firms. We review the revenue potential and internal economic considerations, how brokers are communicating with clients verbally and electronically, and the regulatory and operational considerations that brokers must consider in running or launching their programs.

Market leaders continue to invest in their fully paid businesses. They recognize that fully paid programs offer a differentiated service to clients and are working to surpass minimum conditions of transparency and client flexibility. Brokers with affiliated prime brokerage divisions or those that already maximize their margin lending book see an additional opportunity with little to no infrastructure costs. Brokers that are just considering fully paid lending may start out with spreadsheets, but recognize that scalable programs require much more time and attention to unlock available supply.

This report is based on primary Finadium interviews with retail brokers and our collection of financial information from 14 US retail brokerage firms. It is an update to our 2010 report, “Unlocking the Supply of Fully Paid Assets in Securities Lending.”

This report should be read by US retail broker-dealers, by US prime brokers with fully paid lending programs for their hedge fund clients, and by international retail brokers looking at best practices for client engagement.

For more information and the table of contents, please visit the Finadium website.

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