Deutsche Bank has released research to its Global Prime Finance clients entitled ‘Why Securities Lending Matters to the 130/30 Manager and Vice Versa’.
Deutsche Bank commissioned the research from Spitalfields Advisors, a consultancy firm focusing on the securities lending market.
Spitalfields Advisors research highlights include: The short sale component of 130/30 strategies requires the borrowing of securities; should the strategy attract the scale of predicted investment this could generate an additional $600 billion of borrowing demand by 2010.
The proliferation of 130/30 strategies will create significant additional demand to the existing $4 trillion of outstanding equity loans. The increased demand could have a significant impact on the pricing and access to borrow in mid tier and hard to borrow securities for 130/30 managers and existing market short sellers.
Increased demand could transform the securities lending marketplace from an opaque, inefficient market, as the demand for better exchanges linked to a central counterparty will increase and the ongoing hunt for transparency will continue.
“An increase in demand for securities driven by the expected growth of 130/30 strategies will have a significant impact on the participants and intricacies within the securities lending industry,” says Anthony Byrne, global head of Securities Lending at Deutsche Bank. “We are pleased to deliver Spitalfields Advisors’ compelling research to our clients, and believe it will provide much needed clarity on the subject of securities lending to all parties.”