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Securities Lending Market Report | H2 2024

Equities

Introduction

It remained a challenged landscape in the equity lending markets over the course of 2024. Strong equity market
performance, accompanied by multifaceted bouts of volatility resulted in reduced appetite to deploy capital, particularly on
the short side. Geopolitical uncertainty, interest rate expectations and growth concerns all contributed to a largely risk-off
approach from investors.

>>> Global >>> North America

Fig 4 - S&P Global Fig 5 - S&P Global
Global Equity Market North American Equity Market

35.00 1.40 25.00 0.80
Lendable Value (Trillions €) 25.00 1.00 On-Loan Value (Trillions €) Lendable Value (Trillions €) 15.00 0.50 On-Loan Value (Trillions €)
0.70
30.00
1.20
20.00
0.60
0.80
20.00
0.40
0.60
15.00
10.00
0.30
10.00
0.40
0.20
5.00
5.00
0.00
-
0.00
Jan 2024 Feb 2024 Mar 2024 Apr 2024 May 2024 Jun 2024 Jul 2024 Aug 2024 Sep 2024 Oct 2024 Nov 2024 Dec 2024 0.20 0.00 Feb 2024 Mar 2024 Apr 2024 May 2024 Jun 2024 Jul 2024 Aug 2024 Sep 2024 Oct 2024 Nov 2024 Dec 2024 0.10
Jan 2024
Group Lendable On-Loan Balance Group Lendable On-Loan Balance
Global equities index performance remained very resilient in the second half of 2024. The S&P 500 and MSCI World Index US equities indices were the standout performer over the period, producing double digit gains for 2024. Dovish interest
both increasing +23.3% and +19.2% respectively through 2024. This represented a continuation of a remarkable rally in rate sentiment and optimism surrounding Donald Trump’s victory in the US presidential election helped support market
risk assets over the past 2 years. That said, this wasn’t without some challenges and spikes in volatility along the way, with gains. President Trump’s policy programme is expected to elevate growth, lower taxes and cut regulation, which has
recessionary and inflation concerns as well as changing monetary policy sentiment all contributing to bouts of volatility. fuelled risk assets and US equity outperformance.
US equity stock market performance lead the way with In response to rising global equity indices, investors have As with the global theme, investor balances have US securities dominated the top global earning equities for
continued optimism in the fourth quarter driven by the maintained a record oversized net long bias within equity maintained a significant net long bias, with conviction on the period, but that did not halt an overall decline in global
Republicans resounding win in the US elections. Europe portfolios which has impacted securities lending flows. the short side low. Sectors driving special demand include equity lending revenues, with a significant reduction in
by contrast exhibited more modest returns, influenced by General collateral activity has been reduced given the glut electric vehicles, artificial intelligence, and renewable average fees running into year-end with refinancing and de-
political uncertainties. APAC was negatively impacted as of long holdings providing opportunity for prime brokers to energy. Demand to source exchange-traded funds (ETFs) risking prevalent. Canadian equities suffered a similar fate
the prospect of Trump’s second term raising tensions over cover shorts internally. We also experienced a dislocation remained robust throughout H2 2024 as they provide an with a drop in fees and revenues due to a lack of specials
potential trade tariffs, specifically with China that has such a in funding markets, due to balance sheet scarcity and GSIB efficient way to gain market expose from either a hedge or and strong equity market valuations causing a reduction
dominant impact on the region. pressures, which was especially pronounced around key directional perspective. Demand was particularly prevalent in the deployment of capital on the short side. South
reporting dates and impacted the appeal to cover shorts in ETFs tracking High Yield Corporate Bond indices due to America bucked the trend somewhat, with Brazil posting
From a securities lending perspective, demand has been
softer against a backdrop of rising equity valuations. While physically. With reduced short side conviction, shorting fluctuating US interest rate expectations. strong revenues as a function of robust short interest in the
the global value of equities on-loan increased moderately themes have been scarce, with specials activity muted. Brazilian retail sector.
over the period, it did not keep pace with the rise in Overall global equity revenues declined 11% YoY.
lendable value, leading to industry utilisation levels falling
17% versus the same period last year.