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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

Read more: Canada

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 stocks.

The stock was the top earner in 2013 with a volume weighted average fee of 267 bps and total securities lending revenue of $36m.
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 2013.

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 sovereign bonds.

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 cash.

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 12%.


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