For securities lending, credit intermediation is a central part of the business. The historical preference of beneficial owners to lend to banks instead of directly to hedge funds has shaped modern business practices and in some cases is enshrined into law. More recently, this once seemingly simple market paradigm has been questioned by participants because disruptive technology, new entrants, and increased costs have led institutions to wonder whether things can change. And if beneficial owners were to no longer see credit intermediation as important, would this serve the needs of beneficial owners? Would a new paradigm create new challenges of its own?
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