July 2022

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The global securities lending business is taking its next turn for beneficial owners and hedge fund clients. Recent trends include a sharp growth in available inventory, outsized revenue growth in Special Purpose Acquisition Companies (SPACs) and other hard to borrows, and securities lending as part of a package of financing options. In addition, regulation, technology and transparency initiatives worldwide are continuing to reshape market structure.

Recent events including the Finadium Investors in Securities Lending (FISL) 2022 conference show industry thinking that can be grouped in two categories: evolutionary forces driven by existing dynamics and external factors including macro pressures. Increased technology and data are overarching themes, whether a combination of communication between clients and service providers, more robust data from banks and third party providers, or mandates from regulatory initiatives. Whatever their source, new business models of transparency driven by the recent pandemic are here to stay, with ramifications for the entire industry.

There is no one factor driving securities lending client behavior to the exclusion of others; rather, beneficial owners and hedge funds each face their own set of objectives and constraints. While environmental, social and governance (ESG) policy awareness is prevalent at most firms, this has not yet translated into robust adoption across securities lending programs, where ESG may remain a good idea rather than a functional part of business activity.

This report analyzes market commentary from the FISL 2022 conference along with new research conducted by Finadium in H1 2022 of market participants, and commentary from other recent events on securities lending. The report finds 13 trends and recommendations to watch along with probable outcomes.

Table of Contents

  • Executive Summary
  • A Technology Driven Business
    • – Revenue Dynamics
  • New Regulations Driving Market Structure Change
  • Operationalizing ESG in Securities Lending Programs
    • – Client Views on Regulation and Standardization
  • Can Collateral Be Optimized Across Products?
  • Agents and Prime Brokers on the Trading Desk
  • The Baker’s Dozen Client To-Do List
  • About the Author
  • About Finadium LLC

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