Finadium: Assessing the European Client Securities Finance Market

This report is an analysis of the 73 large beneficial owners that drive the European lender marketplace, the newer lenders that are hinting to join, and the drivers that encourage or discourage the participation of each group. We assess broader market forces that impact European securities finance including Uncleared Margin Rules, MiFID II compliance oversight and what it will take to maintain a robust EMEA franchise in the market 18-24 months from now.

The European securities finance market is working through multiple challenges at once, all of which are transparent to the range of market participants. The dynamics of who lends securities in Europe – beneficial owners – still trends on a core group of deeply entrenched pensions, Sovereign Wealth Funds and central banks, with a few insurance companies and asset managers for good measure. Meanwhile, new potential lenders are exploring the market, driven by the opportunity for efficiency optimization and additional earnings.

A conflict of pessimism and optimism pervades the European securities finance market landscape. On the one hand, the negative impacts of regulation across the Continent have contributed to heightened requirements for participation and to the near exit of some categories of beneficial owners. Pessimists note that service providers invested in one way of doing business are heading towards a losing outcome. On the other hand, agents, prime brokers and vendors are developing new technologies and business models based on a critical need to adopt mechanisms to keep their clients engaged. As far as innovation goes, the last two years have seen exceptional strides. Some service providers can also see silver linings with new clients entering the lending business.

A compelling story is that the future of European securities finance belongs to technology. We agree, but the emerging landscape is more nuanced than that. A two-tiered market will require multiple strategies for success.

This report should be read by European securities finance market participants, including lenders, borrowers, intermediaries, technology vendors and regulators.

A direct link to the report for Finadium research clients is

For non-subscribers, more information is available here.

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