Boston-based eSecLending has carried out "several custom"
peer-to-peer securities lending and repo transactions for
clients over the past year.
The third-party lending agent told Global Investor/ISF it
has facilitated a number of direct trades between pension funds
and other alternative counterparties.
"We expect to see many more of these trades going forward,"
said Chris Jaynes, the firm’s president, head of
client relationship management and business development.
"These alternative structures will fill the void left by
banks and brokers who can no longer support certain securities
lending and repo transactions due to increased capital
Direct or peer-to-peer lending offers an option for
beneficial owners to lend securities to other pension funds,
insurance companies and CCPs, bypassing the credit of a major
Many of these entities have higher credit ratings and a
better credit profile than traditional bank or broker dealer
borrowers or repo counterparties.
Profitable areas of lending programmes
Meanwhile, Jaynes says US small cap stocks and Asia equity
markets have been the most profitable areas for lending
programmes over the past twelve months.
Beneficial owners have also seen significant revenues
generated from a relatively small number of individual specials
globally, particularly in the energy and consumer discretionary
"The beneficial owners who have benefited the most are those
that have adjusted their programs to take advantage of new
opportunities," says Jaynes.
"Adding new markets and/or collateral types, and employing
multiple routes to market and trade structures including
exclusives and term are some of those opportunities.
"Those clients that actively manage their programs and adapt
as the markets evolve will continue to benefit as changing
market conditions continue to create new opportunities for
Jaynes adds that eSecLending has also seen growing demand
for lower spread borrows, known as general collateral, over the
General collateral (GC) names provide lower returns than
'special’ or hard to borrow names
Jaynes puts this trend down to prime brokerage 'long
supply’ decreasing and some lending agents placing
minimum hurdle rates on general collateral lending due to
"We expect demand for general collateral activity to
continue to be dislocated throughout 2016, as various lending
agents determine the return on regulatory capital they need to
indemnify their clients," he adds.