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Securities Lending Market Report | June 2022

>>> Final Thoughts & Outlook

The first half of 2022 has been a tumultuous one. A large number, if not all factors that have driven higher Securities
Finance demand in H1 are still there and are even accelerating into the latter part of the year.

The geopolitical landscape remains strained in many places, RWA management remains a prominent issue for the
the inflation story continues to be of major concern and market as everyone battles with limited resources. There is
is going to be hard to control without the risk of tipping no doubt in my mind that the subject of centrally cleared
countries into recession. Central banks have already moved SFT’s will be a topic highly debated over the coming
away from any forward guidance and are very focused in on months and the time is ripe for such discussions to be had.
real time data for their decision-making leading to a more Lastly, no paper nowadays would be complete without
volatile market, as it tries to second guess data prints and a mention of ESG. This will be a topic to be debated for
rate outcomes.
some time however, both investor and regulator focus is
Current supply chain issues will continue and are not easily most certainly growing. Whilst some may wrestle with their
fixed. The EV space which has been a long-term directional ability to reconcile ESG and securities lending, the global
play is still struggling due to chip shortages and the securities lending industry has done a tremendous amount
increasing cost of materials as demand for Electric Vehicles of work to define market best practice on how the two There is no doubt in my mind that the subject
vastly exceeds carmakers production capabilities. can co-exist, with asset owner ESG policies embedded
into their lending programmes. Securities lending will
Travel, which has not fully recovered and is suffering from of centrally cleared SFT’s will be a topic highly
capacity and staffing issues, is still having to deal with the continue to play an important function in supporting liquid
more restrictive policies seen in Asia holding back some and efficient markets necessary to underpin the global debated over the coming months and the time
previously lucrative routes plus the increased costs of fuel. sustainability agenda.
So, despite all the many challenges mentioned above the is ripe for such discussions to be had.
The general environment for raising capital also remains environment remains very conducive for securities finance.
unattractive. After a dire first half in the IPO space with This is especially true for those asset owners that have
listings globally down 47% in terms of deal numbers, and diversified portfolios and flexible collateral guidelines. The
almost 60% in value, H2 is not shaping up to be any better ability to be able to adapt to the changing landscape is
with higher rates and more volatile markets challenging crucial as collateral needs continue to evolve at a fast pace.
valuations amid weak investor sentiment.
No doubt the second half of the year will continue as the
The Corporate bond space which has been a significant first ended with strong demand and strong returns.
outperformer from a securities finance perspective YTD is
likely in line for another bumper revenue period as demand
remains robust on the back of High yield issuance drying
up after a record 2021. Companies are finding it more and
more difficult to refinance or raise new capital and there will
no doubt be some restructuring that will cause pockets of
stress.

Technology will continue to be the great enabler. This year
we continued our partnership with HQLAx and went live
with a one-sided tokenised trade with a view to being fully
tokenised before the year is out. This really is a leap forward
for the industry and has a multitude of wider ramifications
as the possibility of instantaneous (atomic) settlement and
the monetisation of so called “trapped” assets edges closer
to reality.