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Securities Lending Market Report | H1 2024

Looking Ahead Equities

Looking ahead to the second half of the year and 2025 we anticipate the current situation to persist. Volatility has returned >>> Introduction
and we expect this to be a continued feature in global markets.
This will create opportunities in securities lending. Structurally we expect the market to continue to move towards a state
of normality with declining rates and a tapering of central bank interventions. This normalisation will likely alleviate some While Equity markets have mirrored the global trends outlined in the previous
pressures on ancillary costs but will require market participants to remain vigilant in optimising their collateral and financing pages; we have seen some regional nuisances with Europe in particular posting
strategies. Enhancing operational efficiencies and adapting to the evolving regulatory landscape will be crucial to ensuring significantly lower returns in the first half of the year. Bright spots globally centre
sustainable returns in a complex market environment. Pledge solutions continue to feature in discussions and are becoming a around Asia where we saw strong growth in equity markets, and we cannot ignore
significant feature of the market. Across the market there is an intense and growing focus on “the cost of doing business”. the Americas equities markets that still delivered over half of revenues attributable
equities globally.
On the regulatory front we would chiefly highlight two areas.
In the following pages, we examine in more detail, the performance of the equities
i. The Basel III Endgame, particularly balance sheet ratios related to LCR and NSFR. Commercial banks are confronted markets in the first six months of 2024, written by Andrew Dyson, CEO, ISLA.
by higher regulatory capital costs. These changes will result in banks being required to allocate substantially more
capital against their trading and financing activities and could significantly increase borrowing costs and impact liquidity In previous reports we have shared publicly available repository data to uncover
availability. potential trends in the use of security interest arrangements as well as SFTR
reporting trends. Given the increasing role of pledge, as highlighted during the
ii. The US SEC has announced the go-live date for the mandatory clearing of UST repos (30th June 2026), with cash USTs panel discussions at our 31st Annual Securities Finance and Collateral Management
going live earlier, (31st December 2025). The FICC expect more than $3 Trillion of additional volume will come into conference in Geneva, we will look to publish more detailed insights in the coming
Clearing as a result, there are very serious implications to market structure and potentially liquidity in USTs as an asset months. If you would like to discuss the data in the interim, please reach out to our
class to be considered as a result of the changes, in particular for non US market participants, location of the transaction Regulation & Policy team.
is not the driver and firms should be aware of the implications direct and indirect on their businesses.
Overall securities finance markets continue to navigate a period of transition. Maintaining a strategic and adaptable approach
will be key for participants aiming to optimise returns and manage risks in the evolving landscape.

Equities
Andrew Dyson
CEO, ISLA