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Equilend : EquiLend 10th Anniversary
equilend – 10 yeaRS of innovaTion 18 is crucial, especially in current high volatility periods, when shorting bans are imposed. But greater transparency for clients is also crucial. “We expect all top-tier lending agents will continue to increase the transparency of their programme activities for clients and their consultants,” notes Clayton. “Best practices will include regular outreach through frequent review meetings and market update calls to discuss the dynamics of the securities lending marketplace.” In addition to greater transparency, clients are expecting a greater range of services and markets from lenders. In the next decade, as in the last, it looks likely that this will drive greater differentiation of services between securities lenders. Over the past decade, the development of the third party lending business – notably eSecLending and Goldman Sachs Agency Lending (GSAL) – weaned clients off their dependence on their custodians or investment managers for securities lending. This diversification has been positive for the market, believes Kevin McNulty, CEO, International Securities Lending Association (ISLA): “ The wider trend is that all parties in the business are having to be more creative and interesting regarding their offering. This should mean more innovation across the business and possibly the development of another batch of specialist providers.” Sourcing stock from emerging markets will be one way that aspiring players will be able to stand out. “Over the next five years, there will be an increase in demand for emerging market stock,” says Nadd-Aubert. Initially, he believes, niche players with specialist portfolios will lead, as happened in South Korea a few years ago. As the demand becomes greater, larger providers will follow. “It is not that smaller firms are not controlling their risks,” he notes, “it’s more that they tend to move quickly to meet new demand.” While better education on the part of lenders will benefit both sides of the industry, there are limits to how informed beneficial owners can become. Mutual funds’ boards, who typically have heard a presentation on securities lending every quarter for years, tend to be well-educated. But the same is not true for fund trustees. They are Over the next five years, there will be an increase in demand for emerging market stock” Fred Nadd-Aubert, Credit Suisse >> EL.indb 18 26/08/2011 09:55