ISLA has released the 21st edition of its Securities Lending Market Report, featuring insights from Clearstream on fixed income markets across EMEA, US, and APAC regions during the first half of 2024.
ISLA CEO Andrew Dyson also shares his perspectives on equity market developments over the same period.
The report aims to help market participants and stakeholders understand key trends and influences in the global securities lending industry.
Looking ahead to the second half of the year and 2025, there is anticipation that the current situation will persist: “Volatility has returned and we expect this to be a continued feature in global markets. This will create opportunities in securities lending. Structurally we expect the market to continue to move towards a state of normality with declining rates and a tapering of central bank interventions,” according to the report.
On the regulatory front two areas were highlighted:
- The Basel III Endgame, particularly balance sheet ratios related to LCR and NSFR. Commercial banks are confronted by higher regulatory capital costs. These changes will result in banks being required to allocate substantially more capital against their trading and financing activities and could significantly increase borrowing costs and impact liquidity availability.
- The US SEC has announced the go-live date for the mandatory clearing of UST repos (30th June 2026), with cash USTs going live earlier, (31st December 2025). The FICC expect more than $3 Trillion of additional volume will come into Clearing as a result, there are very serious implications to market structure and potentially liquidity in USTs as an asset class to be considered as a result of the changes, in particular for non US market participants, location of the transaction is not the driver and firms should be aware of the implications direct and indirect on their businesses.
“Overall securities finance markets continue to navigate a period of transition. Maintaining a strategic and adaptable approach will be key for participants aiming to optimize returns and manage risks in the evolving landscape,” according to the report.