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European specials suffer fee drop
03 October 2013
Fees have fallen for borrowing European specials in spite of rising supply
Demand to borrow European specials has failed to rise despite a recent increase in supply of shares in lending programmes.
The lack of demand has in turn pushed down fees since the start of the year, according to Simon Colvin, analyst at Markit Securities Finance.
Markit’s data shows that demand to borrow Stoxx 600 shares has fallen to recent lows of 2.1% of shares outstanding.
The 1,000 most-borrowed European equities have an average benchmark fee of 73 basis points, a number that has fallen by six bps since the end of 2012.
The fall in average fees has been driven by a drop in fees for borrowing the most expensive shares, said Colvin.
“The value weighted average “specials” fee - for shares with a benchmark fee greater than 100 basis points and demand to borrow over $10m - has held consistently below the 4% level since the start of the year.”
However there are some exceptions to this trend. Finnish firm Qutotec is now the fifth most expensive European share to borrow as demand to borrow the stock has trebled in the past nine months to a whopping 21% of shares.