June 2015

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There is an old saying in Capital Markets: “revenue comes from trading but profits come from operations.” Securities lending is a business process that exemplifies this truism. Firms are making major changes in reaction to regulatory and market realities and have to maintain profitability at the same time. As part of this evolution, securities lending operations and technology are becoming part of the integrated enterprise-wide service offering of major financial services firms. Along the way, firms are struggling to balance the needs of operational efficiency, compliance and cost management.

This Finadium research report analyzes securities lending operations and technology in the post Basel III era. We evaluate the forces that are driving change, trends in enterprise-wide bank operations and technology management, and how securities lending can best maintain its operational efficiency to support both internal and external clients. This is no easy task, and requires breaking down silos, patterns and habits that have existed since the beginning of securities lending. We look at the strategies and tactics that have been employed to face the operational stresses: whatʼs been successful, whatʼs failed and what organizations have learned through the process of implementing their changes.

And finally, we address the core questions: Are there optimal operational models for todayʼs securities lending business? If so, what problems do these models solve and what problems do they introduce? What is the work left to do to make sure that the operational structure is ready to tackle the next generation of challenges faced by securities lending? These are the core challenges facing the securities lending industry as the business merges to become part of the bankʼs Enterprise Cloud. This is fundamentally a new way of thinking about securities lending with more important changes to come.

This report has been written for bank managers both inside and outside securities lending thinking about how to best manage operations and technology going forward. These are complex questions and matter not only to securities finance clients but also to bank-wide functionality and competitiveness.

This report is 26 pages with 7 exhibits.


■ Executive Summary

■ Integrating Securities Lending with the Larger Bank
– Drivers of Change

■ Impacts on Organizational Structure and Technology
– Part 1: The Basic Operating Structure
– Part 2: Merging the Silos
– Part 3: Merging Into the Larger Bank Enterprise

■ The New Target Operational Model
– Expectations for Technology

■ Issues and Challenges
– The Role of the Operations Specialist
– Portability and Transferability
– Profitability and Budgeting

■ About the Author

■ About Finadium


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