Fidelity Prime Services has officially launched its securities lending pricing portal called PB Optimize that displays, compares and ranks rates and performance from various prime brokers, details of which emerged late last month. The firm has also released more information about its features following testing with some of Fidelitys 125 current hedge fund clients.
The portal will help hedge funds to best allocate their short portfolios among their prime brokers, Fidelity says. It is offered free to current hedge fund clients of Fidelity. A source with knowledge of the portal told Global Custodian last month that the firm does not have plans to launch it as a standalone service for non-clients. Fidelity Capital Markets, the firms institutional trading arm, will not have access to the portal, according to the source.
According to details released today by Fidelity, PB Optimize features three modules, including a broker scorecard, which allows hedge funds to evaluate short balance allocations and prime brokers stock loan performance; security research, which allows clients to research and graph securities lending rates and lendable quantity information; and cost analysis, which allows them to rate optimization opportunities across prime brokers to find potential cost savings.
The portal will also integrate independent securities lending data, including quantity available to be borrowed on loan, from Markit.
PB Optimize is part of Fidelitys attempt to bring more transparency to the securities lending marketplace, says Thomas Tesauro, executive vice president of Fidelity Prime Services. By sharing Fidelitys lending rates alongside those of other prime brokers, we are putting our clients and their investors first, empowering them to make more informed decisions, Tesauro says. We expect this tool will ultimately drive market efficiency, benefiting hedge funds as well as investors.
The Wall Street Journal last month reported that 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 with knowledge of the portal 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.
But hedge funds who have used the platform have found it useful. Using PB Optimize has improved the accuracy and efficiency of our rate discovery process, says Adam Nemser, head trader of Southpoint Capital. Furthermore, it has enabled us to better analyze how our rates change over time across multiple prime brokers, improving our ability to compare the quantitative and qualitative aspects of these relationships.
Tesauro adds, Investors want to know that the firms with whom theyre investing are making financing decisions on their behalf based on the best possible data and analysis. Any tool that drives transparency is good for investors and for the market as a whole.
(CG)