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Canada securities lending market grows
23 May 2014
Despite hot stocks such as heavily-shorted BlackBerry, fees across all Canadian sectors dropped in the second half of 2013, according to DataLend
The Canadian securities lending market has seen a healthy rise
in the value of securities on loan over the past 12 months,
indicating the market is growing, according to DataLend.
Fees to borrow Canadian equities were however on average lower
than other regions over the period from January 2013 to April
2014. Fees averaged at 43bps compared to 65bps for US equities
and 90bps for European stocks.
Across equities, IT stocks on average commanded the highest
fees between January 2013 and April 2014 with 174bps, partly
driven by BlackBerry, which was one of the most heavily shorted
The stock was the top earner in 2013 with a volume weighted
average fee of 267 bps and total securities lending revenue of
Fees for industrials and healthcare averaged at 134bps and
100bps respectively between January 2013 and this April.
Western Innovations was the second best earner, commanding
average fees of 1,492bps.
Fees across all sectors dropped in the second half of
There was little demand to borrow Canadian government bonds
during the first half of 2013 which led to fees averaging at
just 10 bps between January 2013 and April 2014, just slightly
above 9 bps for US treasuries and far below 18bps for European
However, DataLend noted that the scarcity of high-quality
collateral has resulted in higher demand for Canada's AAA-rated
sovereign debt, increasing on-loan volumes towards the latter
half of 2013 into 2014.
Canada’s securities lending market is
predominantly non-cash collateral which accounts for 74% of
transactions, compared to just 26% cash collateral. It is the
opposite of the US market where 75% of collateral is
Financials accounted for 39% of total Canadian securities on
loan in 2013, followed by energy securities at 22%.
The best revenues were generated through lending financials, IT
and industrials, each sector accounting for 20% of overall
revenue last year. Energy accounted for 15% and materials