Despite challenging market conditions, securities lending has been growing steadily in Asia-Pacific, fuelled by investor demand, automation, and data. A key factor for this growth is innovation, particularly the development of more efficient technology, in the industry.
“In the past 10 years, I would say the importance of Asia as a region for securities lending within global banks has shifted significantly to a point where it is seen as a region that could outperform Europe soon if it is not already,” says Andrew McCardle, head of Asia at EquiLend, a global fintech firm that provides messaging services between securities lenders and borrowers.
EquiLend’s shareholders are global financial institutions engaged in securities lending including State Street, Northern Trust, BlackRock, National Bank of Canada, Goldman Sachs, UBS, Credit Suisse, Morgan Stanley, Bank of America Merrill Lynch, and J.P. Morgan.
“Automation has to be the other area that has changed significantly. Twenty years ago deals during the day would have been written down by hand initially whereas now the drive to have things booked in an automated fashion with the scale and efficiency that this brings is huge,” McCardles says.
The firm has been operating in Asia-Pacific over the past 10 years with offices in Hong Kong and Tokyo. It has a total of 54 institutional clients in the region, including all the big securities lending agents as well as 13 local Japanese banks. Globally the firm has 180 institutional clients.
Equilend also operates a data unit known as DataLend which has been generating data for the securities lending industry.
“The other area of change, as with so many industries, has been the use of data. Market data outside of a firm’s own intel within SBL (securities-based lending) 20 years ago was very minimal whereas now it is a very important part of the process,” he says.
According to DataLend, the global securities finance industry generated US$796 million in revenue for lenders in August 2021, representing a 51% increase year over year, and a 5% increase from the US$756 million generated for lenders in July 2021. Global broker-to-broker activity, which consists of broker-dealers lending and borrowing securities from each other, reached US$211 million in revenue in August, a 19% increase from 2020.
