Securities Lending & Borrowing

Securities Lending & Borrowing Training Course

Background The number of Securities Lending & Borrowing transactions have been growing steadily for years. They now represent a substantial part of the daily settlement value in most European markets and play an important role in facilitating market liquidity.   Securities L & B markets are driven by a diverse set of considerations such as raising portfolio returns, taking positions, creating leverage, raising finance, increasing delivery efficiency, and others. Both the lender and borrower side are also driven by a heterogeneous group of players.   This course gives an overview of Securities Lending and Borrowing for those with no prior knowledge in the field. It outlines the different L & B markets with their specific processes, opportunities, and risks; it explores the motivations of different players in the market; and it describes the different circumstances in which institutions lend or borrow securities.   Delegates Anyone contemplating using Securities Lending or Securities Borrowing or who is entering an existing Securities Lending or Securities Borrowing operation and has no or only a partial knowledge.   Content   Overview What is securities lending ? Brief history Market size in geographical regions asset classes Gc vs. Specials Lending options and features of programmes Why lend securities? Who lends? Lender considerations: revenue vs. Risk Counterpart selection Lending arrangements Custodian programmes Third party programmes Exclusive arrangements Self managed programmes Borrowing securities outline Why borrow securities? Understanding demand drivers Fail coverage Yield enhancement strategies ("tax arbitrage") Inventory finance Shorting Financial strategies Who are the borrowers? The relationship between prime brokers and hedge funds The loan cycle examined Initiating a loan Locating stocks Fee negotiation: fee v rebate Loan confirmation Delivery of securities & collateral; daylight exposure Management of collateral Mark-to-market Margin calls Substitutions Processing of income and of events Manufactured dividends Voting rights Corporate events and corporate actions Terminating a loan: recalls vs. Returns Fee and rebate accruals Risks and mitigants Counterparty risk Mark risk (collateral) Liquidity risk Operational risk Legal and regulatory risk Legal and regulatory environment Agreements and documentation