Can Peer to Peer Securities Finance Take Off in 2021?
While a modest amount of Peer to Peer (P2P) business has occurred in securities lending and repo for over a decade, attempts to make it mainstream practice have met with limited success. A new generation of thinking and products has emerged in 2021, which could potentially enlarge the market and change key assumptions about bank credit intermediation globally.
P2P securities finance is the business of asset holders lending to each other. The mechanics of what P2P involves can vary widely between: transactions with direct credit exposure; transactions with counterparty default indemnification or other protection; or arranged trades passed on to banks for operational fulfilment or credit intermediation. This report seeks to create one working definition for industry use.
Finadium has conducted a wide-ranging survey of market participants engaged in P2P securities lending and repo, including asset owners, asset managers, agent lenders, custodian service providers and platform operators. We spoke with both current providers as well as firms and individuals that attempted to launch P2P in the past with mixed success. Our core question is, what thinking or market elements exist now that could make 2021 different than prior years for securities finance P2P success?
This report should be read by any securities finance market participant including beneficial owners, money market investors, hedge funds, banks, technology firms, other service providers and regulators.
Table of Contents
- Executive Summary
- Breaking Through to Critical Mass
- – Methodology
- How We Got Here
- What’s Different About 2021?
- – Updated Thinking on P2P vs. Balance Sheet
- The New Business Agenda
- The Ideal P2P Framework
- About the Author
- About Finadium LLC