Securities finance generates $9.96 billion in revenue
January 3, 2019

The global securities finance industry generated just under US$9.96 billion in revenue for lenders in 2018, according to market data provider DataLend.

It was a record year in terms of revenue generated for investors that lend out securities from their portfolios, referred to as beneficial owners, since DataLend began tracking the market in 2013. Beneficial owners include asset managers, insurance companies, pension funds and other institutional investors.

According to DataLend, factors that impacted the revenue increase in 2018 included:

Increasing on-loan balances for most of 2018 as a result of rising asset prices, with the exception of December, which saw a sharp selloff in global equities;

A small number of very hot specials (hard-to-borrow securities) in the equities market;

The sustained need for high-quality liquid assets (HQLAs);

Increased demand to borrow Asian assets.

Nancy Allen, Global Product Owner of DataLend, says: "While early industry estimates suggested revenue may exceed $10 billion in 2018, the securities finance market finished the year just shy of that mark. However, 2018 was a very positive story with gross revenue up 8 percent compared to the year prior, primarily driven by higher market values."

Regionally, EMEA and APAC revenue was up 20 percent and 30 percent respectively in 2018; both regions benefited from a significant increase in volumes, while spreads increased only slightly. The only region not to see an uptick in revenue was the Americas, which dropped 6.5 percent year over year.

Brian Lamb, CEO of DataLend's parent company EquiLend, says: "Securities lending was once considered a back-office, operational activity offering beneficial owners incremental yearly returns on their portfolios. Now, we see a firm shift in mindset, where more firms treat lending as a front-office activity generating significant alpha for those who lend."

Echoing the trend, EquiLend's NGT securities finance trading platform also experienced record growth, with a 35 percent increase in the average daily notional value traded on the platform in 2018 compared to 2017.





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The global securities finance industry generated just under US$9.96 billion in revenue for lenders in 2018, according to market data provider DataLend.

It was a record year in terms of revenue generated for investors that lend out securities from their portfolios, referred to as beneficial owners, since DataLend began tracking the market in 2013. Beneficial owners include asset managers, insurance companies, pension funds and other institutional investors.

According to DataLend, factors that impacted the revenue increase in 2018 included:

Increasing on-loan balances for most of 2018 as a result of rising asset prices, with the exception of December, which saw a sharp selloff in global equities;

A small number of very hot specials (hard-to-borrow securities) in the equities market;

The sustained need for high-quality liquid assets (HQLAs);

Increased demand to borrow Asian assets.

Nancy Allen, Global Product Owner of DataLend, says: "While early industry estimates suggested revenue may exceed $10 billion in 2018, the securities finance market finished the year just shy of that mark. However, 2018 was a very positive story with gross revenue up 8 percent compared to the year prior, primarily driven by higher market values."

Regionally, EMEA and APAC revenue was up 20 percent and 30 percent respectively in 2018; both regions benefited from a significant increase in volumes, while spreads increased only slightly. The only region not to see an uptick in revenue was the Americas, which dropped 6.5 percent year over year.

Brian Lamb, CEO of DataLend's parent company EquiLend, says: "Securities lending was once considered a back-office, operational activity offering beneficial owners incremental yearly returns on their portfolios. Now, we see a firm shift in mindset, where more firms treat lending as a front-office activity generating significant alpha for those who lend."

Echoing the trend, EquiLend's NGT securities finance trading platform also experienced record growth, with a 35 percent increase in the average daily notional value traded on the platform in 2018 compared to 2017.



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More on:  Securities lending