Finadium Research Report

The Finadium Model RFP for Securities Lending and Collateral Management

September 2009

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The Request for Proposal (RFP) process in securities lending and collateral management is due to evolve. Historically, selection decisions have focused on operating data, including utilization and how much was earned on a portfolio, and on a description of the lending process. These elements are important and were particularly meaningful for educating plan sponsors entering securities lending for the first time. However, a changing marketplace calls for a different type of evaluation.

Our model RFP is qualitative and risk-oriented. For example, how does a trading desk make its lending decisions in an uncertain market and how does it consider the merits of pooled collateral programs? How much an awareness of risk management permeates the organization, and how do decision makers vet new products and structures are in the context of a firm’s risk management culture? This type of questioning is more complex than a revenue-oriented RFP but offers a more thorough assessment of the strengths and weaknesses of an agent lender.

In the end, responses to the RFP will become a cornerstone of trust and confidence between service provider and beneficial asset holder. On this basis an RFP should seek to establish the “spirit” of a lending program; by aligning lender and agent objectives and philosophies, both parties should have a greater expectation of a successful program. This is even more important as the role of securities lending agents expand in the marketplace.

This report is 13 pages.
■ Why Create a New Request for Proposal (RFP) in Securities

■ The Finadium Model RFP for Securities Lending and Collateral

■ About the Author

■ About Finadium


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