Global securities finance revenue fell by 7 percent year-on-year (YoY) in 2020 to sit at was $9.3 billion, despite December becoming the second most revenue-generating month of the year for all securities, according to IHS Markit.
IHS Markit says the primary growth drivers for equities were increased borrow demand during the Q1 market decline followed by borrow demand tied to capital raising during the recovery.
Peak monthly revenue for 2020 was observed in June, when a trio of US equities delivered “outstanding lending returns” on the back of corporate action related arbitrage opportunities, says Sam Pierson, director of securities finance at IHS Markit.
December revenue was notched up as just over $900 million, an increase of 12 percent YoY. Also in December, lendable assets reached a new all-time in December, nearly $30 trillion.
Pierson says that this adds to the challenge of increasing utilisation going forward, however, a similar statement could have been made at lower levels entering 2020 before the surge in utilisation during the Q1 decline.
Many of the drivers of the revenue upswing in Q4 remain in place heading into 2021, including increased traditional and special purpose acquisition company initial public offerings, public short seller campaigns and exchange-traded funds (ETFs) usage, he states.
ETFs enjoyed a 34 percent YoY revenue increase, with its securities lending revenue at $400 million. Government bonds saw a 8 percent YoY revenue rise, reporting $1.3 billion in securities lending revenue.
In November, IHS Markit reported that global securities lending revenue hit $742 million, marking the third consecutive month of increasing returns following a challenging environment during the summer.
Global revenues declined by 1 percent year-on-year (YoY) in November, but increased 3.6 percent month-on-month (MoM).
