Analyze. Understand. Monitor.

The global leader in securities finance solutions

Leverage our experience to optimize your program performance, enhance investment decisions, and confirm good governance through powerful tools and analytics.

– Largest securities lending dataset includes corporate actions, credit consensus, ETF collateral lists, liquidity and more

– Global securities lending flows, borrow costs and market share updated intraday

– Diverse signals to identify short squeezes, capture alpha, and refine risk management

– Robust performance measurement tools exceed enhanced industry standards

– Full-service governance, performance, risk, and operational assessments https://www.spglobal.com/securitiesfinance compared to 24.13% ($578.8M) in 2021 and Sovereign Wealth funds, 24.45% ($577M) in 2022 vs 22.87% ($548.7M) in 2021. Insurance vehicles contributed just over 5% ($132.7M) of all on loan balances. Average on loan balances were $2.36T over 2022, a slight reduction from $2.39T over 2021.

Throughout 2022, revenues increased across the lending community, which was positive for investment portfolios. Asset managers received the largest share of the lender revenues over 2022 ($4.2B vs $3.4B in 2021), even though they had less on loan than pension funds which generated ($2.69B vs $2.42B) and sovereign wealth funds ($1.5B vs $1.1B in 2021). Insurance vehicles generated $450m in revenues over the year ($436.4M in 2021), as seen in fig. 4.

Over the years, securities finance has become an integral part of the investment management process. Risk management has become an increasingly important consideration for all beneficial owners as they seek to protect both their revenues and investors in a new era of higher interest rates, increased volatility, and greater uncertainty. As the industry has changed, the increase in engagement across the beneficial owner community has been initiated by a fervent desire to better understand the tools and processes required to optimize performance, oversee compliance, manage risk, and minimize opportunity costs.

At S&P Global Market Intelligence Securities Finance (SF), our current focus is the introduction of solutionsbased capabilities where we combine data and analytics to provide transparency and tools, so that clients have a better understanding of how their programs are being run. We have done this by focusing on three separate pillars we believe are essential to the oversight and management of any securities finance activity: control, monitor and understand.

Control

Many beneficial owners lend through their custodian or a third-party agent. When lending through an agent lender, any direct control that an owner has over their assets is transferred to the lending agent. Therefore, it is particularly important that a robust framework is in place that dictates the terms and conditions in which an agent lender can engage when lending a security. Many of the program parameters are negotiated through the Securities Lending Agreement (SLA) with the lending agent, these should be reviewed regularly to ensure that any new market initiatives or workflows are being captured. Regular reporting should be required to ensure that the agreed conditions are followed. It is also advisable that these conditions are captured by an internal securities lending policy to ensure that all internal stakeholders are aware of the lending structure. As seen throughout the past year, effective and timely reporting remains essential in managing and identifying potential risks.

Monitor

Active monitoring of the securities lending activity is essential to ensure that risks are managed, and revenues are optimized. The monitoring function for a beneficial owner can be split into three different areas: Exposure, Exception Management, and Liquidity Management. Managing exposures should occur across lending agents at the counterparty legal entity level and collateral holdings level (credit ratings, maturity buckets, liquidity profiles). Overseeing this requirement across different lending vehicles and agents can sometimes be both complex and cumbersome. As part of our offering, we provide access to consolidated reporting and a portal to give asset owners a wholistic view of their programs.

Exception management lies at the heart of any oversight function. A clear and timely process to identify exceptions is critical for effective risk management and program governance. These checks should be made daily to ensure that any potential exceptions can be addressed promptly and that the program is not assuming additional and unauthorized risk. With an increase in both the quantity and type of regulations affecting securities lending, having an appropriate and effective exception management process allows asset owners to both recall and efficiently restrict assets, and to be aware of any opportunity costs that may exist as a result. To address the need for beneficial owners to independently monitor adherence to agreed lending parameters, we launched a Compliance Check portal for beneficial owners. The portal provides an exception-based tool to identify potential breaches of lending parameters at the transaction, instrument, market, and counterpart level.

Equally important to any lending program is understanding the liquidity profile of their loan positions. We also provide liquidity data to assist with the efficient management of lending limits and identifying any potential market liquidity squeezes.

Understand

All beneficial owners should have a deep understanding of the activity taking place across their asset pools and understand how this can be either expanded or contracted if their risk profile is adjusted. A securities lending program’s earnings potential is often linked to its appetite for risk and therefore, appropriate benchmarking is considered the best practice. As was seen during 2022, the “specials” market (stocks being lent at a fee greater than 500bps) has become an important driver of revenues for many asset owners. Having a clear understanding of these rates, the liquidity risks associated with lending these positions and the potential revenues should any of the metrics be adjusted, remains critical to optimizing a lending program. We offer extensive reporting and access to relevant data for proper oversight management.

S&P Global Market Intelligence has developed several tools that are specific to beneficial owners to assist them in meeting the challenges listed above. These tools are proving popular across the beneficial owner community as volatility remains a key feature across all markets.

Looking towards the spring and summer months, we believe that securities lending revenues will remain robust. We also believe that the first half of 2023 has the potential to produce strong returns for beneficial owners. To ensure that a lending program is participating in these returns in a risk-adjusted manner we encourage all beneficial owners to consider many of the controls that have been mentioned. As our engagement with beneficial owners continues to grow, we believe that S&P Global Market Intelligence is well placed to independently assist and advise the beneficial owner community on the best way of achieving their securities lending goals.

Monica Damas-Shaw, Director, Head of the US Beneficial Owner Product and US Team Lead for Securities Finance. Her role focuses on the development and expansion of the beneficial owner offering, as well as the management of beneficial owner relationships in the Americas. Monica joined S&P Global (formerly IHS Markit) in April 2019. Prior to S&P Global, she worked at JP Morgan and Credit Suisse as a Securities Lending client relationship manager. In both roles, she was responsible for managing and assisting large institutional clients with their securities lending programs. Monica holds a B.B.A in Finance from Hofstra University.