According to market data provider DataLend, the securities finance industry worldwide generated $8.66 billion in revenue for lenders in 2019.
While the year 2018 was a record amongst recent times for securities lending revenue, global revenue of 2019 was down 13% in comparison. Securities lending revenue is calculated as the amount paid by borrowers, typically broker-dealers on behalf of their hedge fund clients, to temporarily borrow equity and fixed income securities from long-holders of these assets, known as beneficial owners. fintech Security
According to DataLend, the decrease in revenue was experienced over all regions globally 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.
Global Product Owner of DataLend, Nancy Allen, stated that “Global macro uncertainty, driven by trade wars, Brexit and actions of the central bank, resulted in a general lack of conviction by hedge funds and alternative investment managers in 2019. As uncertainty loomed, the securities lending markets experienced lower on-loan balances and fees globally. However, 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 progressively positive 2019.”
The securities finance market encountered a slight recovery in the third and fourth quarters, especially in the equity markets, where a bunch of “specials” also considered as “hot” or “difficult-to-borrow” securities that trade 500 basis points (bps) and more 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, which together generated $680 million in lending revenue in 2019.
