A new analysis by Finadium of the fully paid securities lending market evaluates the global growth of the business. Retail brokers, custodians, agent lenders and technology firms are developing their offerings and expertise. At the same time, market participants must stay attuned to both written rules and anecdotal suggestions to remain competitive and compliant amid evolving regulatory guidelines. For firms looking to understand the details of how fully paid works today, this report is a primary source of information.
There is a split between established relationship-driven brokers offering a high touch service for high net worth and mass affluent customers, vs. brokers that provide a lighter touch and automated service to the mass market. Some firms in this second group are online while others are not; there is no one way to categorize how different types of brokerages approach fully paid.
The market is changing operationally as well. Client eligibility thresholds have crept lower, automation has increased and brokers are using fully paid as a client retention and sales tool. The level of client price transparency is also greater than ever, with some firms now supporting clients in shopping around for their lending rates the same way they would compare brokerage fees.
Featured topics in this report include an evaluation of client communication strategies, eligibility requirements, fee splits, technology and collateral management, and the numbers of how much inventory is potentially available in US programs across 19 retail brokerages. We review outstanding regulatory directions along with broker feedback. The report concludes with our assessment of best practices and considerations for the industry as fully paid continues to grow. The conclusions are drawn from conversations with broker-dealers, a review of current regulations and data collection from brokers with over $36 trillion in customer assets.
This report is intended to provide a reliable industry overview, assist practitioners in optimizing their programs, and help industry participants and regulators better understand market dynamics. It should be read by any securities lending market participant, service provider and regulator. This report updates previous Finadium reviews of fully paid lending conducted in 2010, 2013 and 2021.
A direct link to the report for Finadium research clients is here
For non-subscribers, more information is available here.