The global securities finance industry generated nearly $10 billion in revenue from lenders in 2018, according to market data provider DataLend.
The year was also a record recent years in terms of revenue generated for beneficial owners, such as asset managers, insurance companies, pension funds and other institutional investors, DataLend stated.
Factors that impacted revenues included increasing on-loan balances as a result of rising asset prices, combined with the sustained need for high quality liquid assets (HQLAs), and the increasing demand to borrow Asian assets.
“While early industry estimates suggested revenue may exceed $10 billion in 2018, the securities finance market finished the year just shy of that mark. However, 2018 was a very positive story with gross revenue up 8% compared to the year prior, primarily driven by higher market values,” said Nancy Allen, global product owner, DataLend.
Regionally, EMEA and APAC revenues were up 20% and 30% respectively in 2018, as both regions benefited from a significant increase in volumes. However, the Americas witnessed a drop in revenues of 6.5% year-on-year.
EquiLend, the parent company of DataLend, also reported record growth for its NGT securities finance trading platform, with an uptick of 35% in the average daily notional value traded.
The increase in volumes and revenues also signals a shift securities lending activity from the back-office to the trading desk.
“Securities lending was once considered a back-office, operational activity offering beneficial owners incremental yearly returns on their portfolios. Now, we see a firm shift in mindset, where more firms treat lending as a front-office activity generating significant alpha for those who lend,” added Brian Lamb, CEO, EquiLend.