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Securities lending revenue for Q1 2023 was the highest generating quarter since 2018, according to Matthew Ross, associate director of EquiLend Data and Analytics Solutions.
Reviewing the data for the year-to-date value — which measures results to the end of April 2023 — Ross indicated that “everything was up globally across both equities and fixed income”.
Global lender-to-broker revenue for 2023 reached US$3.81 billion, according to EquiLend, representing a 27 per cent increase YTD. The Americas recorded a 38 per cent increase to US$2.30 billion over this period, with global equities jumping 28 per cent to US$2.92 billion and global fixed income rising 24 per cent to US$889 million.
Speaking at the 13th Annual Conference on Canadian Securities Lending, Chelsea Grossman, managing director and North American head of agency lending client management at State Street, stated: “It’s never a dull moment in the lending market and Q1s have been particularly eventful.”
Revisiting the noteworthy events to hit the financial markets over the past few years, Grossman noted how Covid-19 hit the world in 2020, which resulted in extreme market volatility, a focus on exchange-traded funds (ETFs) and sector-based borrowing in travel, retail and healthcare.
The Russia and Ukraine war commenced in Q1 2022, putting a strain on resources. Last year also saw an increased focus on electric vehicles and a rise in crypto — all occurring in a rising interest rate environment.
This year, the industry faced the Silicon Valley Bank and regional banking crisis, with the debt ceiling becoming “the most prevalent wrench in the market to date”, according to Grossman. Despite this hindrance, firms continue to look forward to 2024.
From a data perspective, Ross believed that “increased revenue looks to be holding up”. With regulatory changes in the pipeline, in particular the SEC’s 10c-1 in the US, this is likely to present challenges for users.”But as a fintech firm we are well placed to help our clients,” he continued.
“Ultimately it will lead to more data transparency, which will enable us to provide more actionable analytics and insights to our users.”
During the Perspectives on Securities Lending panel, Brendan Eccles, global head of securities lending at Scotiabank, indicated that the industry should be reviewing broader central counterparty solutions when evaluating future technological enhancements.
He highlighted that capital is a “huge issue” and that the industry has not found a solution to help agent lenders in terms of their capital challenges.
In addition, Eccles advised the industry to explore streamlined distributed ledger technology (DLT) which could provide benefits when applied to corporate actions and recalls.
