Fidelity’s Capital Markets division is testing a securities lending information portal with some of its Prime Services hedge fund clients that shows daily updated securities lending rates offered by various Wall Street firms.
The service was initially reported in the Wall Street Journal and was confirmed to Global Custodian by a source with direct knowledge of it.
Fidelity had no official comment about the portal.
Sourcing securities lending rates can be a laborious process involving searching lenders Web sites or calling lenders to inquire about rates for specific securities. Fidelitys new platform houses the rates offered by numerous lenders in one place, allowing borrowers to make quicker and more informed decisions on whether or not to borrow and which lenders offer the best rates, the source said.
The service, which Fidelity expects to launch officially within the next couple months, will be offered free to all hedge fund clients of Fidelity Prime Services, the source told Global Custodian. The firm has no plans to offer it as a stand-alone platform to non-clients, nor is rate information shared with Fidelity Capital Markets, the firms institutional trading arm, the source said.
According to WSJ, Fidelity has met resistance from some brokers that are declining to provide their rates. The concern is they may have to adjust their rates to match those of competitors if borrowers can more easily compare the rates of various lenders, the newspaper says. The source conceded to GC that there could be a pricing advantage for entrenched players in the lending market not to be part of a scheme whereby clients could very quickly compare the most efficient route.
According to the source, the portal contains securities lending rates and does not have any trading functionalities. Hedge funds can use information found on the portal to make borrowing decisions but still must engage transactions via a prime broker or another agent.
Fidelity has about 120 hedge fund clients, many of which are expected to sign up for the service, the source said.
(CG)