SECURITIES LENDING Trends & Developments Guru Raghavan.

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SECURITIES LENDING Trends & Developments Guru Raghavan

Transcript of SECURITIES LENDING Trends & Developments Guru Raghavan.

Page 1: SECURITIES LENDING Trends & Developments Guru Raghavan.

SECURITIES LENDINGTrends & Developments

Guru Raghavan

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Index

• Needs of the market place• Requirements for cross border mobilisation• Current constraints• Possible solutions

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Market needs..

• Increased demand for secured lending • Renewed focus on counterparty credit risk

management• Infrastructure that recognizes four dimensions in

securities lending: custody, settlement, borrowing/lending, tri-party

• Demand for process automation and innovation in securities lending

• Demand for increased netting to minimize any unnecessary settlement

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Market needs..

• Demand for increased opportunities in balance sheet netting

• An environment where bonds can move freely and without friction between settlement systems

• Infrastructure that supports fluid upstream and downstream movement of securities

• Demand for cash led standardization • A trading environment where cash investment is not

driven or influenced by settlement considerations

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Requirements for cross border mobilization

•Fragmentation of collateral liquidity pools

•Operating hours (time-differences and cut-off time)

•Legal and fiscal barriers •Proliferation of different legal documentation

•Different fiscal reporting requirements

•Lack of complete set of information

•Lack of harmonization of relevant market practices

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Current constraints•Fragmentation of collateral liquidity pools

•Operating hours (time-differences and cut-off time)

•Legal and fiscal barriers

•Proliferation of different legal documentation

•Different fiscal reporting requirements

•Lack of complete set of information

•Lack of harmonization of relevant market practices

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Possible solutions

• Netting (Vertical and Daily netting of all outstanding positions)

• Pooling• Optimization• Reporting• Settlement through auto allocation mechanisms

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