Assessing the European Client Securities Finance Market
Finadium
October 2019
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.
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 trends that impact 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.
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.
Table of Contents
- Executive Summary
- A Split in the European Securities Finance Outlook
- Counting the Number of Clients
- – Forward-looking Impacts to Client Participation
- – How Many Clients for Agent Lenders and Service Providers?
- The Impact of Uncleared Margin Rules
- – The Treasury Argument
- – The Short Selling Argument
- Charting Possible Outcomes
- – The Technology Vendor Play
- Appendix A: List of Leading EMEA Beneficial Owners
- About the Author
- About Finadium LLC