Australia

The Australian securities lending market had almost $459bn (£363bn) of lendable equities at the end of 2022 according to S&P Global Market Intelligence, up from $438bn in 2021.

In terms of value on loan, the 2022 total of over $20bn was almost unchanged from the previous 12 month period. Once again this figure remains below the $21.6bn recorded in 2019, indicating that the market has still not fully recovered from the 2019-20 trend for superannuation funds to put an end to their securities lending programmes.

There was more encouraging news on equity lending revenues, which rose sharply to $185bn –almost double the total for 2020 and an increase of more than $70bn on the 2021 total.

Australian Super’s latest annual report notes that the fund participates in securities lending programmes through agency arrangements with JP Morgan Chase Bank NA and directly with approved third party borrowers.

The financial assets transferred to other entities under securities lending arrangements include Australian and International equities and fixed interest securities. The fair value of financial assets on loan at reporting date was $21,215mn (2021: $14,303mn).

The Australian Stock Exchange’s latest half year results saw a resilient underlying performance across the group with operating revenue coming in at $499.5mn. While this was fractionally down when compared to the prior period, it was described as a pleasing underlying performance given that the comparative period was a near alltime record result and there had been significant changes in the external environment.

Operating revenue for listings and technology and data was up, as was net interest income. This was offset by declines in markets and securities and payments.

In August 2022, the Australian Securities and Investments Commission (ASIC) warned brokers to be careful about or reconsider offering high-risk products and services to retail investors - such as securities lending - where the true cost is masked.

Following changes in market conditions that dampened retail investor activity, some brokers in Australia looked to broaden their revenue base by offering retail investors what ASIC refers to as high risk products or services that may be unfair, inappropriate or result in poor outcomes.

In Australia, securities lending has generally been limited to institutional investors who have the size, scale and sophistication to understand and manage the risks. ASIC commissioner, Danielle Press, said the regulator would intervene or take action where it saw unfair or inappropriate offers of securities lending arrangements to retail clients.