The primary source of global securities finance news and analysis Issue 273 16 March 2021 TAKING STOCK Norges Bank Investment Management’s global head of financing Matthew Brunette discusses its long history of lending, its new ESG policy, and why it never got behind central clearing Automating Swaps Work Flow © 2020 EquiLend Holdings LLC. Swaptimization_ad_SLT_final.indd 1 1/10/20 10:29 AM Accelerating Collateral Mobility Frictionless ownership transfers of assets At precise moments in time Without cross custodian settlement movements Delivery vs. Delivery (“DvD”) Capital cost savings MARKETPLACE DIGITAL COLLATERAL REGISTRY TRUSTED THIRD PARTY - (BNY Mellon Triparty, BNP Paribas Securities Services, Citi - Custodian connecting in 2021) www.hqla-x.com Lead Story 3 Accelerating Collateral Mobility Frictionless ownership transfers of assets At precise moments in time Without cross custodian settlement movements Delivery vs. Delivery (“DvD”) Capital cost savings MARKETPLACE DIGITAL COLLATERAL REGISTRY Where are all the ETF champions? The securities lending market must do as State Street, Bank of New York, Brown hampered by known “impediments” including TRUSTED THIRD PARTY more to fully leverage the “ideal” collateral Brothers Harriman, Northern Trust, BlackRock “nomenclature challenges, multiple sedols instrument of exchange-traded funds (ETFs) and J.P. Morgan — to name but half a dozen (due to cross-listings), classification confusion as allocations into passive vehicles continue — are also the top names in the ETF industry, (is it an equity, is it fixed income?)”. to soar, according to Citi’s global head of ETF either as issuers or custodians, and often both. products Andrew Jamieson. It cannot surely be too long before their clients He also argues ETFs have a perception and their colleagues become more vocal to the problem among European institutional Writing in the latest International Securities missed opportunities?” he writes. investors who see it as solely a retail product Lending Association (ISLA) quarterly report, — a claim he strongly disputes. - (BNY Mellon Triparty, BNP Paribas Securities Services, Citi - Custodian connecting in 2021) Jamieson is calling on major players straddling Borrow demand for ETF shares and overall the securities lending and ETF markets to take lendable availability have trended upwards Jamieson first raised many of these concerns ownership of the challenges standing between over the past three year by what at first glance in a similar article published in an ISLA report www.hqla-x.com greater use of these funds. To date, he says, the appears to be a good clip. But both these several years ago where went on to predict mission has mainly been led by “a small band of growth rates pale in comparison to the overall global assets under management (AuM) in ETFs enthusiasts” hailing from the ETF space, rather inflows into ETFs over the same period, which would grow rapidly and suggested the securities than within the securities lending community. suggests there is much more to do. lending market should act quickly to make the most of the opportunities this would afford. “Illustrious names in securities finance such According to Jamieson, greater acceptance is continued on page 6 www.securitiesfinancetimes.com Inside this issue Latest News Securities finance revenue starts 08 2021 with a bang Latest News Pirum secures J.P. Morgan as first 14 user of corporate actions service Looking Ahead 18 First trades executed on blockchain Buy Side DekaBank, Hauck & Aufhäuser and DekaInvest settled Taking Stock €300 million worth of securities lending versus collateral Norges Bank Investment Management’s global head of financing discusses its 22 trades with Comyno’s Digital Collateral Protocol long history of lending, its new ESG policy, and why it never got behind clearing Publisher: Justin Lawson Divine Opportunity [email protected] May you live in interesting times +44 (0) 208 075 0929 A pandemic upended the world. Industry experts Editor: Drew Nicol predict what the New Normal will mean for securities [email protected] 24 finance revenues +44 (0) 208 075 0928 Reporter: Alex Pugh Data Analysis [email protected] Global dividend forecast 2021 +44 (0) 208 075 0926 IHS Markit data indicates global dividends are set to Reporter: Maddie Saghir recover overall, but not universally, this year and hit [email protected] +44 (0) 208 075 0925 30 $1.78 trillion Office manager: Chelsea Bowles +44 (0) 208 075 0930 Marketing director: Steven Lafferty Industry Apppointments [email protected] Comings and goings at FIS, Published by Black Knight Media Ltd 32 WeMatch, Pirum and more Copyright © 2021 All rights reserved Flexible. Modular. Customizable. 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Products and services may not be available in all jurisdictions. 1 Global Investor ISF Survey 2020 – Securities Finance Agency Lending named Most Innovative Lender News Round-Up 6 Where are all the and peaked as high as $8.5 billion during in certain names and generated significant ETF champions? the COVID-19 inspired period of volatility in fee income,” Jamieson explains, adding that continued from page 3 early-2020, he says. there are now over 350 ETFs globally where the annualised average lending revenue With global AuM now over $7 trillion, and Jamieson argues this illustrates the increasing outweighs the cost of the ETF management Europe comfortably smashing through the $1 adoption of ETFs as a macro-hedging tool in fee — “a substantial improvement from 2018 trillion mark for the first time ($1.28 trillion by addition to a core long holding, which is a trend when there were 150 such products”. the end of 2020), volumes have exploded, the financing market should be cognisant of. Jamieson explains. As such, Jamieson argues, what has become “The desire to pledge ETFs as collateral, “evident over the last couple of years is the However, with the global AuM forecast to hit particularly in relation to the evolving regulatory continuing lack of ‘ownership’ within the $12 trillion in the next few years, ETF numbers environment, is as strong as ever, and put securities finance industry itself”. on-loan or pledged as collateral are “still simply, if more and more clients hold them modest at best”, he notes (and in increasing quantities) the need for He continues: “Now is the time for industry greater acceptance as a collateral instrument practitioners to rise to the challenge, and In 2021, ETFs are far from a novel feature in in their own right will only increase,” he writes. to resource and prioritise this opportunity the securities financing market and Jamieson appropriately. This is particularly says now is the time to address lingering Greater transparency, gleaned from regulatory relevant when so many of the industry’s issues and fully embrace this fund-type and all reporting frameworks, coupled with “inherent in- heavyweights generate so much revenue it can offer a market crying out for high-quality built diversification make ETFs an ideal collateral from the product itself.” collateral sources and greater yields. instrument regardless of some of the current hurdles in understanding,” he concludes. TriVista Capital selects IHS Markit data shows an increase in visible Northern Trust for securities availability in Europe of nearly 40 per cent from Moreover, the securities lending world has lending services just under $50 billion to almost $70 billion over something to offer the ETF space in return. the past three years. Northern Trust has been appointed by “We have already witnessed this in the US, Japan-based manager TriVista Capital to Meanwhile, on-loan balances, while “more where an active options market (in particular provide global custody services and manage volatile”, have increased 30 per cent