Finadium: Planning for Securities Finance After COVID-19

A new Finadium report delivers a core review of some of the most important trends facing the securities finance industry for a scenario analysis of potential outcomes.

COVID-19 has accelerated multiple changes in capital markets including an increased reliance on automation, working from home and the need for close cooperation between organizations and vendors to achieve individual and industry goals. For securities finance, an additional set of changes are taking place that will impact the business decisions of every participant in the value chain.

This report investigates key themes in the capital markets space that directly impact securities finance, including: the number of lenders and borrowers; the impact of Basel IV regulations; new corporate governance trends; defining best execution; and the role of CCPs. The outcome of these developments range from the firmly negative to the largely positive, with the actual result depending on what role a participant plays in the market. Some readers may find the information in this report encouraging, noting how trends reinforce their dominant or emerging market position. Others may wince at what they see as a further erosion of their business model. In either case, now is not the time to sit on one’s laurels; the securities finance environment of the next several years will continue to be sharply competitive for everyone. The most prepared firms are most likely to benefit.

Broader structural changes in the investment and regulatory landscape look likely to force more rethinking of what securities finance must do to remain competitive. Some low hanging fruit, for example the cost of post-trades processing, can be solved by the industry alone with further work. However, bigger ticket items like how pensions approach corporate governance, how each regulatory jurisdiction applies Basel IV minimum floor rules for risk-weighted assets, or how many clients are large and diverse enough to be interesting for a large bank service provider, are bigger than securities finance working groups; these will require creative thinking across the industry to generate consistently successful business results. As previously slow-moving trends pick up steam globally in the COVID-19 era, securities finance may have just two years before the ideas in this report are fully realized.

Technology will continue to permeate through capital markets with broad impacts from headcount to the sophistication of data flows within institutions. This report highlights relevant developments in blockchain and Distributed Ledger Technology (DLT)/blockchain, however, given the coverage that technology already receives and its central position in the thinking of industry practitioners, a wider, more comprehensive analysis is not the subject of this report.

This report should be read by a broad cross-section of participants in the securities finance market, including beneficial owners, hedge fund borrowers, agent lenders, broker dealers, technology firms and regulators. The scenarios presented are meant to encourage discussion on strategic planning for a future that seems increasingly likely.

A direct link to the report for Finadium research clients is

For non-subscribers, more information is available here.

Related Posts

Previous Post
JFDS: deep reinforcement learning for option replication and hedging
Next Post
IA launches fintech guidance for investment managers

Fill out this field
Fill out this field
Please enter a valid email address.


Reset password

Create an account