Clearstream releases results of conference voting surveys (collateral transformation, negative interest rates)

At its January 2013 Global Securities Finance Summit, Clearstream conducted a series of real-time votes including audience participants on various market issues. Some of the results were expected and others surprisingly revealing, including the percent of voters expecting to participate in collateral transformation trades. We review the full results that are now posted online.

– 55% of market participants expect an increase in repo and securities lending volumes in 2013, while 31% expect a decrease.
– 60% of voters said that collateral transformation trades will be important for their business going forward. Only 7.5% said that these trades apply to their business but are not important. This is consistent with the findings from our December 2012 research report, Sizing Up the Collateral Transformation Trade.
– 69% of voters said that they would only do collateral transformation trades if they received a higher rate of return than currently offered. This is also consistent with our findings in interviewing institutional investors. However, we have heard from repo dealers and banks that their expectation is that there are insufficient amounts of some “collateral transformation” assets like corporate bonds to meet existing demand.
– 58.5% of buy-side voters will start clearing OTC derivatives only once regulations become effective.
– While there were many possible responses, 1/3rd of voters said that margin and collateral efficiency is the most important factor for buy-side firms in choosing a CCP.
– A whopping 86% of respondents said that low or negative interest rates would force treasurers to change their asset management strategies. Our survey of institutional investors in the repo market due out this month shows that 47% of the executives we spoke with have no plan for managing negative interest rates in their cash portfolios.
– 66% of voters said that there was sufficient collateral to meet projected demands. In other words, no collateral shortages expected.
– 66% also said that the revised LCR would meaningfully influence how firms manage their own risks.
– 70% of voters said that new European regulations on securities lending were negative to profits and volumes.

The Clearstream conference had upwards of 1,000 attendees, mostly from Europe, and all focused on repo, securities lending and collateral management.

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