Asia and U.S. Securities Lending Revenues Outpace Europe

Hong Kong has become the third largest equity lending market in terms of revenue so far in 2015, following an increase in lending rates and short selling.

According to research from Markit global securities lending has reached $4.2 billion, down 3% year on-year, as U.S. and Asian revenues offset disappointing figures from Europe.

Hong Kong saw the largest growth of any market, with a 57% increase in revenues. This was due to average borrowing costs which rose from an average 1.27% to 1.92%, indicative of higher demand for select securities.

Furthermore, short sellers have increased their presence in Hong Kong due to a relaxation in regulation.

“Asia has proven to be the success story of the year for the industry with securities lending revenues in the region over a quarter ahead compared to the same last year,” says Markit’s Andrew Laird, securities finance analyst, in the research note.

U.S. securities lending, which represent just under half of total global lending revenues generated so far in 2015, increased 7% due to large gains from U.S. listed equities and exchange traded funds (ETFs.

However, in Europe revenues have fallen by 19% so far, as the impact of the European Central Bank’s (ECB) quantitative easing programme continue to be felt.

In Greece, lending activity completely halted in June following a short selling ban.

“This decline has not been driven by a single market as seven European markets find themselves in the ten global markets where securities lending revenue has fallen by the largest margin from last year’s total to date,” Laird adds in the note.

The U.S. remains the largest securities lending market, followed by Germany.