Securities lending industry tops $2trn on loan

Securities lending industry tops $2trn on loan

The securities lending industry is now a $2+ trillion business, according to DataLend.

The New York-based data provider sent out a note on Monday, explaining that the value of stocks and bonds on loan in the marketplace reached more than $2 trillion recently.

That’s the highest value since DataLend began tracking the market in 2013.

The lendable value, referring to the value of securities lenders have made available for borrowing, surpassed $16trn - also a DataLend record.

More than 45,000 unique securities are on loan worldwide.

Speaking to Global Investor/ISF last month, BNP Paribas' Lance Wargo, said he expected the securities lending space to grow beyond $2 trillion in 2017.

However, he added that the winners and losers will be distinguished by clear, well-thought-out objectives in their securities lending programs. 

"If the purpose is for incremental revenues with little to no risk, then a limited number of borrowers and a government securities-only cash reinvestment pool might be the best solution," said Wargo, North American head of agency lending at BNP Paribas Securities Services.

"If the objective is to beat a benchmark, then the lender may seek opportunities from both general collateral and special securities, as well as a more comprehensive reinvestment schedule."

DataLend stats show cash collateral as a percentage of on-loan balance totelled 39.48% at the start of March (-6.39% year-on-year.)

Non-cash collateral as a percentage of on-loan balance: 60.52% (+6.39% year-on-year)

Lenders earned $9.16 billion in securities lending revenues in 2016, including $4.67 billion in North America; $2.64 billion in Europe; $1.67 billion in Asia-Pacific; and $182 million in the rest of the world.

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