September 2016

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The Direct and Peer to Peer marketplaces are opportunities for lenders of cash and securities to meet borrowers without bank intermediation. While the nature of the transaction has existed for decades, the business is seeing a new evolution as major service providers enter the space with organized, structured product lines. Direct and Peer to Peer models both challenge current ideas about who is a safe counterparty and provide opportunities for revenue generation and product expansion in a changing market.

This report presents the opinions of asset managers on lending to hedge funds and their peer institutions, and provides commentary on the offerings of three large agent lenders that have entered the business. For asset managers, lending without a bank is a possibility but one that must be carefully evaluated and approved by Boards; this may be easier to do in repo than in securities lending. Agent lenders are creating services that target market segments and the needs of specific actors. While interest is high in these new services, they are not for everyone, and agents are taking care to ensure they can roll out successful products to their clients.

This report has been written for a general securities finance audience interested in non- bank transactions. The report should be immediately useful to cash and securities lenders, agent lenders, prime brokers, alternative asset managers, regulators and technology firms.

This report is part of the Finadium Executive Briefing series, providing briefings and analysis to the financial markets industry.

This report is 14 pages with 3 exhibits.

■ Executive Summary

■ Defining Direct and Peer to Peer
– Methodology

■ What Asset Managers Think

■ Agent Lender Business Models for Direct and Peer to Peer

■ Future Market Directions

■ About the Author

■ About Finadium


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