Getting ready for FISL this week: beneficial owner update; tech for seclending; how clients make program decisions

We’ve unlocked a few more recent Finadium articles for the buy-side to get ready for FISL, the Finadium Investors in Securities Lending conference, coming up May 8-9 in NYC. Both beneficial owners and hedge fund attendees are invited to check out these recent articles to think about what matters to them, what they want to hear about from their peers, and the questions they want to ask services providers. Access is free through May 9 and does not require a login.

In Securities Lending Update for US Beneficial Owners: Staying Prepared for a Changing Market, we discuss with Fidelity Agency Lending (FAL) why beneficial owners should be prepared to review their agent lender relationships, consider their lending parameters and investigate new routes to market. While the future environment for beneficial owners lending to certain types of borrowers offers some challenges, there are also routes to lessen new cost impacts and potentially make individual asset pools more attractive than today. FAL’s Doug Brown notes that part of the choice offered to beneficial owners is selecting an agent lender that can align and support the types of clients that fit best into the overall program. FAL’s primary focus is on the ’40 Act Fund sector. By supporting fast settlement, Straight-through Processing and the evaluation of RWA mitigation opportunities like the NSCC SFT CCP, FAL believes that it can best support its clients through the next evolution of securities finance market dynamics.

GLMX’s Sal Giglio looks at technology needs for securities lending in Complex Securities Finance Needs a Comprehensive Technology Solution. He notes that securities finance is a market that needs its own applications, built for its own workflows and best practices. The ability to engage bilaterally or multilaterally, using a common, highly efficient, error-resistant technology framework has been a great leap forward beyond exchanging instant messages and emails. In the absence of effective technology, the high operational cost of discovering adequate liquidity in today’s expansive securities finance ecosystem risks impeding these existentially critical flows. The next phase of technological evolution for securities finance will connect users across markets, enabling small and large firms alike to benefit from automation while capturing new pools of liquidity across fixed income and equity securities.

In A FISL idea: more beneficial owner seclending decisions by the trading desk, not the Board, we contend that the time has come for Boards to step back from their historical roles driving securities lending program decisions in favor of more control by fund management teams. We propose that once Boards approve or reject a securities lending program at the top level, then trading managers should be allowed to hire and fire agent lenders and make policy decisions like they do with other products (i.e., equities, options, OTC derivatives). Boards don’t need to approve a new clearing agent for options or get involved in collateral schedules for OTC derivatives, so why should they need to engage at this level for securities lending? They don’t. When we say trading managers, we mean this in a broad sense of the word – at some firms it may be an equities desk, at others a financial resource or treasury desk, and at others maybe its the Chief Investment Officer who should be responsible. Our point is that more securities lending decision making should be given to the people close to the daily business and responsible for direct oversight.

We look forward to seeing you at FISL this week!

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