Spotlight on Securities Lending
April 30, 2013

Potential regulatory changes, namely the global Basel III Accord and US Dodd-Frank Wall Street Reform Act, will make it a lot more expensive for custodians and their institutional investor clients to retain the historic agent lending business model for lending out securities to earn additional revenues. Such a scenario leaves custodians to decide just how much indemnification and at what cost they wish to offer and institutional investors must determine whether or not they wish to make changes to their securities lending programs.

Interlinked with the prospective changes to indemnification is the issue of central clearing. While popular in the equities and fixed-income markets, reliance on a clearinghouse to process transactions hasn't exactly taken hold in the securities lending industry. And with good reason. The system wasn't exactly broken, or so custodians and institutional investors thought. Apparently, regulators don't think so, leaving clearinghouses to capitalize on the opportunity to expand their reach into the securities lending market and participants to decide whether changing their longstanding bilateral relationships into a menage trois is worth the effort.

Click here to view this Spotlight Edition on Securities Lending.





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Potential regulatory changes, namely the global Basel III Accord and US Dodd-Frank Wall Street Reform Act, will make it a lot more expensive for custodians and their institutional investor clients to retain the historic agent lending business model for lending out securities to earn additional revenues. Such a scenario leaves custodians to decide just how much indemnification and at what cost they wish to offer and institutional investors must determine whether or not they wish to make changes to their securities lending programs.

Interlinked with the prospective changes to indemnification is the issue of central clearing. While popular in the equities and fixed-income markets, reliance on a clearinghouse to process transactions hasn't exactly taken hold in the securities lending industry. And with good reason. The system wasn't exactly broken, or so custodians and institutional investors thought. Apparently, regulators don't think so, leaving clearinghouses to capitalize on the opportunity to expand their reach into the securities lending market and participants to decide whether changing their longstanding bilateral relationships into a menage trois is worth the effort.

Click here to view this Spotlight Edition on Securities Lending.




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