Securities Lending: Return of the EMEA Specials
By Matt Ross
On March 25, 2020, fees to borrow EMEA equities averaged 43.67 bps, the lowest value at any point in the last three years. As global equity markets continued to see large sell-offs due to COVID-19, the market uncertainty coupled with short-selling bans led to lower demand in the securities lending market.
However, as bans have been lifted and equity markets have started to rebound, demand for EMEA equities has returned. Fees to borrow EMEA equities have steadily risen, with a dramatic climb throughout May and into June. Fees for EMEA equities started to rise toward the end of April, but we have seen a steeper increase since mid-May, when most short-selling bans were lifted across European markets.
EMEA Average Fees (bps)
With fees approaching—and for a couple of days, topping—70 bps, we can look at a handful of specials that significantly drove demand and revenue across the market. In looking at the top earners in April versus May, we can clearly see that there has been a significant uptick in demand as the top 5 stocks earned over $10 million more in revenue month on month.
Looking at these names we can see the impact COVID-19 has had on lending markets as securities like Deutsche Lufthansa, and the transportation industry as a whole, have been trending from warm to special. However, we also see securities here that were trading warm prior to COVID-19, including Wirecard and Grenke, that are trading at even hotter levels now. With the securities lending market in EMEA heating up, DataLend will continue to monitor the demand and see if this upward trend continues into the second half of the year.
WHO WE ARE
DataLend—the securities finance market data division of EquiLend, a FINRA-regulated financial services firm—provides aggregated, anonymized, cleansed and standardized securities finance data covering all asset classes, regions and markets globally. DataLend operates on a “give-to-get” model, processing more than 3 million global transactions per day. DataLend’s data set covers more than 51,000 securities on loan with a daily on-loan balance of $2.1+ trillion and lendable balance of $22 trillion (as of January 2020).