Copying and distributing are prohibited without permission of the publisher
RMA: optimistic outlook for securities lending
23 October 2013
A panel at the RMA conference on securities lending was optimistic about the industry’s future. Hardeep Dhillon reports
Agent lenders and beneficial owners have “reasons for long-term optimism”, according to Keith Haberlin, senior vice president of Brown Brothers Harriman Boston, speaking at the RMA conference on securities lending.
He noted that hedge fund assets are exceeding pre-crisis levels and the industry is becoming a mainstream investment vehicle for conventional investors.
Haberlin added that directional trading strategies would also help the demand to borrow securities and that a normalisation of monetary policy would provide support for merger and acquisition activity. He said he would “expect this to feed through to securities lending”.
Thomas Wipf, managing director at Morgan Stanley, highlighted the benefits of regulation. While he warned that until regulatory issues are resolved there will be uncertainty, he said “this will lead to a safer and sounder system”, and highlighting the benefits of central counterparties (CCPs).
James Slater, executive vice-president Global Collateral Services at BNY Mellon, believed there was a need for a CCP that “works for agent lenders”. He said “we could see business done via lenders with CCP programmes” but noted that “the risk sharing at CCPs is a deal breaker for agent lenders”.
Haberlin said that most of the different forms of regulation make sense in isolation but not together. Some are very prescriptive on the collateral and counterparty diversification and he said that this could lead to a tipping point when “this business does not make sense due to the additional margin”.
He was optimistic about Eurex’s new securities lending CCP product: “Eurex is doing a good job in Europe and I would like to see more CCPs going that way”.