It’s not often senior figures from each of the three competing securities lending data providers appear in the same room together, facing some of the largest pension funds and asset managers in the US.

DataLend, FIS (formerly SunGard) and IHS Markit - the trio of stock loan analytics firms - have each worked to build up their own comprehensive coverage of global lending and borrowing activity for their clients over the years.

Enhancing their respective benchmarking capabilities, which allow agent lenders and beneficial owners to measure performance against the total market and pre-defined peer-groups, has also been a key focus for each company and appears to be growing in importance.

Indeed, benchmarking is the topic of choice when the data providers meet to address an audience of asset owners at the IMN’s International Securities Finance & Collateral Management Conference in Florida on January 31st.

“The discussion is reflective of the fact that beneficial owners are becoming far more engaged with evaluating program performance, both on a macro level and security level,” Melissa Gow, director of securities finance at IHS Markit - one of three panelists taking part in the closed-door afternoon discussion, told Global Investor/ISF.

“We’re spending a greater amount of time speaking directly to asset owners and educating them on the best ways to utilize the data, analyze their returns and spot missed opportunities. Above all, we aim to offer our clients appropriate levels of transparency.”

Josh Gray, associate director, securities lending and proxy governance at Russell Investments, recently told Global Investor/ISF that benchmarking is a key component when it comes to running a successful lending program. 

"Russell Investments monitors exposures, looks at performance metrics and parameter requirements of our lending agents, and uses third-party benchmarking services to ensure loans are competitively priced in the market," he said.

IHS Markit's Gow has been involved in the securities finance market for nearly 15 years. Much of that time has been spent working closely with some of the largest lenders and borrowers on IHS Markit’s platform, which tracks over $15trn of assets in lending programs across the globe.

Statistics from the firm, now a merged company after Markit joined with IHS last year, show that 2016 securities lending returns were the highest in four years mostly driven by lenders being able to achieve better pricing for their loans.

Weighted average fees achieved throughout the year were 43.8bps, a 1.1bps uptick. Meanwhile, overall lending supply increased by 3.5%. North American equities, led by the US, were the single largest revenue generator in 2016. Canadian equities also saw a significant lift in fees generated.

“Clear and concise data is playing a critical role in improved program performance today,” Gow believes.

The securities lending business and the wider financial industry has had to deal with its fair share of shock political outcomes, market volatility and growth concerns over the past twelve months. Meanwhile, pledges of deregulation, lower taxes and the likelihood of rising interest rates in the US will keep the markets busy in 2017.

“It will be interesting to see how the macro environment shapes the securities lending business going forward,” Gow adds. “Given the uncertainty at present, lenders and borrowers at the IMN conference will be keen on hearing how they can turn uncertainty into opportunity."

Regulation

Gow is also keen to hear from regulators on the various initiatives impacting the market, including securities lending data collections by officials from the Office of Financial Research who will also be speaking at the IMN event.

A pilot study by the OFR recorded over three reporting days in the final quarter of 2015 found, on average, $9.4trn worth of securities were available for lending. Seven major agent lenders took part in the pilot scheme. Eventually, the OFR is aiming for a permanent data collection of stock loan and repo trades.

“Much of the data from the OFR’s study is consistent with what we’re seeing in our own statistics,” Gow adds. “Demands for transparency are increasing and IHS Markit plays an active role in several initiatives impacting the market, including benchmarking and Securities Finance Transaction Reporting (SFTR). We have a unique view, given the breadth of our securities finance coverage and data capabilities in other areas, such as derivatives, fixed income, FX and commodities.”