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Securities lending revenue falls short

Trading_dataSecurities finance – including stock lending by investment funds – declined last year in both equities and fixed income.

The activity generated $8.66 billion (€7.7 billion) in revenue globally in 2019 – a 13% decline from the year before, although 2018 had been a notably high year.

DataLend, which calculated the figure, said the decline in revenue was experienced across all regions and in both the equity and fixed income markets.

On-loan balances and fees to borrow also declined in all regions, with the exception of Asia-Pacific, which experienced a marginal increase in balance.

Nancy Allen, global product owner at DataLend, said macro uncertainty - including trade wars, Brexit and central bank actions - resulted in a general lack of conviction by hedge funds and alternative investment managers in 2019, leading to lower on-loan balances and fees.

However, Allen added that a significant amount of revenue was generated from lending a very concentrated number of securities.

“Beneficial owners lending those ‘hot’ securities likely will have experienced a more positive 2019,” she said.

Equity lending markets experienced a slight recovery in the second half where a handful of “specials”—also known as “hot” or “hard-to-borrow” securities that trade 500 basis points (bps) and above in the securities lending market—drove revenue higher.

The top five revenue-generating securities in the global securities lending market in 2019 were Beyond Meat, Aurora Cannabis, Canopy Growth, NIO and Casino Guichard-Perrachon.

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