Is it possible to bring transaction cost analysis into the securities lending space? Or is the market too nuanced to support such a universal price-discovery mechanism? Many beneficial owners would prefer that agent lenders serve as active price setters instead of price takers, using available data to establish their own mechanisms for determining loan value, rather than relying exclusively on their brokers’ benchmarks. Some argue that transaction cost analysis (TCA), which has been widely used throughout the industry to provide transparency not only around pricing but also broker trades, type of strategy employed and other detail, could help level the playing field on behalf of lending participants. Whereas TCA has been a good fit for equities transactions as well as non-exchange traded assets such as corporate bonds, applying the concept to a securities-lending arrangement isn’t nearly as straightforward.
