The practice of lending securities solely to raise cash with the expectation of deriving most of the revenue from the cash reinvestment is basically gone from the market. Beneficial owners and agent lenders are both focused on intrinsic value lending which has arisen as regulatory pressure on collateralisation has created new sources of demand. This has resulted in a significant increase in the number of transactions collateralised by securities collateral. This makes collateral flexibility key to taking advantage of these new opportunities.
Michael McAuley, global head of product strategy, securities finance, BNY Mellon, explains:
Where he’s seeing demand for client assets
If the concept of the collateral upgrade trade is new to beneficial owners
How CCPs are developing to meet beneficial owners’ needs
Other trends that he is seeing
(This article originally appeared in the Securities Lending Times, issue 136. It is being reproduced here with approval from the publisher.)