XXXXXXXXXXX - finadium.com · TE NOWLEDE XXXXXXXXXXX finadium.comsecuritiesfinancemonitor/ Barclays operations restructuring addresses a little-recognized ring-fencing risk In February

Issue 06 Securities Finance Monitor 01

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EDITOR’S NOTE

Josh [email protected]

Nicole TaylorBusiness Development and [email protected]

Fan StanbroughDesign and [email protected]

© Securities Finance Monitor 2017

Welcome to this special conference edition of Securities Finance Monitor magazine.

The purpose of our inaugural Investors in Securities Lending conference is to expand the number and types of industry participants that are paying attention to securities

lending and repo. We’ve taken a “big tent” approach to creating programming and breakout sessions for a diverse audience, including long-only lenders, long/short managers at major investment firms and hedge fund portfolio finance specialists.

This companion magazine for the conference is meant to be both an on-site reference and something you can bring back to the office. Like all Securities Finance Monitor publications, we provide a deep level of information and insight about what is happening, why, and what it means for you as a practitioner. The magazine (like its online version) contains articles from contributors across the industry, and is a natural complement to Finadium’s research subscription for the sell- and buy-side.

This edition features contributions from BNY Mellon on sourcing liquidity, Brown Brothers Harriman on securities lending revenues in a world where asset managers seek to reduce fees, and a Finadium survey of asset manager views on collateral management. Our cover story is on the state of agency securities lending; this piece has captured a wide range of input from across our sponsors, and is unique in the many corporate perspectives that are represented.

Creating a new conference is always a learning experience, and this one is no exception. From researching the needs of attendees to coordinating amongst a dozen sponsors, we’ve increased our level of awareness and consideration of the markets’ needs. A strong annual conferences with representation across the industry means that practitioners can better understand the dynamics of securities finance and are able to solve complex challenges with their peers and counterparts. This ultimately translates to a robust market.

We hope you enjoy the event and look forward to your feedback.

Best regards,

Josh Galper,Editor

02 Securities Finance Monitor Issue 06


Barclays operations restructuring addresses a little-recognized ring-fencing risk In February 2017, global banking giant Barclays PLC announced that it will form a new, standalone operations entity divorced structurally and financially from its underlying banking units. page 06

Placing bets on the likelihood of big US financial regulatory reformpage 06

A new proposal for getting non-performing loans at European banks off of balance sheets page 08

Shifting responsibilities in securities finance require a rethink on technology designA move towards the Enterprise model of bank and investment management means that the expert systems of securities finance history are not viable for the current business models of clients. page 12

Daniel Tarullo resigns from the Fed (!)The big impacts from Republican control of the US Federal government just keep coming. On Friday, Daniel Tarullo, Board Member of the Federal Reserve and a major figure in global financial regulation, announced his resignation effective this April, five years before the expiration of his term. page 12

CONTENTSISSUE 06 | APRIL 2017

From Standardisation to Diversity: the State of Agency Securities Lending

BEST OF THE WEB

Amidst increasing demand from investors to generate extra revenues, the global securities finance industry is steadily moving away from a standard agent lender model and towards a greater diversity of approaches. page 16

COVER STORY


finadium.com/securities-finance-monitor/

FEATURESSecurities Finance: A Source ofNew Liquidity OptionsLooking for liquidity? You’re not alone. The 2008 financial crisis and resultantregulatory reform are having a continuing impact on traditional sources ofmarket liquidity. page 22

When Seeking to Reduce Fees,Every Basis Point CountsHow do you reduce fees without compromising your core strategy? This age old commercial challenge is one now facing the asset management industry. page 25

Asset Managers on Collateral Management in Securities Lending: Survey Results and Best PracticesCollateral management in securities finance remains a robust practice and asset managers appear to be taking all the right steps to appropriately manage their risk exposure.page 28

Sponsor Interviews: Why Participate in Finadium’s Investors in Securities Lending Conferences?J.P. Morgan’s Paul WilsonAVM’s Jeff KidwelleSecLending’s Peter Bassler and Simon LeeCiti’s Jeff Bonaldipage 34

Speaker Profilespage 40

Map of Venuepage 4

Other Important InformationWiFi Network: Finadium Password: FISL2017

slido.com#3037

Agendas can be found at the Registration Desk

Our thanks to attendees and sponsors at our first Investors in Securities Finance Conference. This event has been made possible only with your support. Our goal is to provide high quality dialogue, problem solving and networking for market participants.

We welcome your feedback - please contact us at [email protected] with your comments and suggestions.



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In February 2017, global banking giant Barclays PLC announced that it will form a new, standalone operations entity divorced structurally and financially from its underlying banking units. This is a new kind of business model taking place as a result of ring-fencing rules.

The new UK ring-fencing rules, going live in 2019, will require banks to wall off the risks of their proprietary activities from those of their customer-oriented activities. The Barclays effort is designed to address one of the less appreciated risks in the structure of banks.

Financial firms have been gradually embracing more centralization of their business, technology and operations. So far this has been a voluntary strategy designed to reduce costs and centralize certain operations along functional lines. For example, consolidating settlement into a single team serving all business lines has been popular.

The new risk Barclays and others see is that in the event of a major stress, failure or suspension of one of the fenced entities, the other entities internally dependent on shared resources may lose those resources. The questions really come down to the reporting structure of the organization: which fenced entity really owns a shared operations team? And, which entity really owns the shared infrastructure and technology? If one of the entities encounters serious problems, the operations and technology resources it commands would be put at risk along with the

Barclays operations restructuring addresses a little-recognized ring-fencing risk

business. This could cause a cascade of operational risk into the protected parts of the business and would soundly defeat the purpose of ring-fencing.

The logical response is to isolate critical shared resources from the business into a separate entity altogether. This move by Barclays, one of the largest and most diverse banking operations on the planet, may represent the ultimate logical outcome of the trend towards a shared enterprise operations and technology model.

The ability to successfully implement this plan is dependent on just how closely Barclays will be able to first achieve the topology illustrated in Exhibit 1. In this image of the bank-as-enterprise, the shared resources common to the various business activities of the firm are encapsulated into a single internal organization. The extraction of that entity from the internal bank organization into a separate legal entity is not, then, that much of a stretch. Barclays, it would appear, feels confident enough in the progress they have made in this effort

to execute on the strategy well ahead of the 2019 deadline.

Other firms will not find this an immediately viable approach. If this does become a widespread model for mitigating against the operational risks implied by ring-fencing, technology teams will be very busy between now and 2019 getting their internal ducks in a row.

Financing

ReportingBooks & RecordsRegulatory

Trading

Compliance Credit

Enterprise Operations

Enterprise Technology

Exhibit 1: The enterprise model

Source: Finadium

Placing bets on the likelihood of big US financial regulatory reform

Dodd-Frank isn’t going away but some of the rules that underpin this massive regulation are going to change. The biggest deal is that the basic concept of Risk-Weighted Assets is under attack and changes, if made, would alter the entire Basel III framework. But without getting dramatic, we take the position that we’re going to see some real regulatory

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change this year. Here are some projections of how the market will respond.

The biggest change coming is the Financial CHOICE Act, which we discussed in “Repealing Dodd-Frank: What’s Next for Derivatives and Securities Finance.” The CHOICE Act offers an off ramp from Dodd-Frank rules in exchange for a 10% Leverage Ratio. It’s not clear how that 10% Leverage Ratio is defined without the concept of RWA, but let’s hold that thought. For now, there is an inherent contradiction for major banks in the CHOICE Act: either stick with derivatives rules that have been accepted over the last couple of years or ditch the rules in favor of a (on paper) higher Leverage Ratio. We don’t think there is much question that banks will stick with the OTC derivatives rules. If the new Leverage Ratio is calculated like Basel III, who would trade a 5%/6% ratio for a 10% ratio and jettison years of work for a new derivatives framework that itself has to be rebuilt? We wouldn’t.

To get banks to take the off-ramp, the new Leverage Ratio would need to be much lower, for example equivalent to a Basel III 2% or 3%. That’s not inconceivable if the numerator gets extra assets and the denominator loses OTC derivatives penalties. It’s too soon to know which way this will go however.

We note the move of former Goldman Sachs President and COO Gary Cohn to Director of the National Economic Council. The battle for reform has been between what helps large banks and what helps small banks. According to a recent article in the Financial Times: “Fears that the regulatory agenda will get hijacked by Mr Cohn’s allies at the big banks are shared by thousands of smaller banks, which say that they have been unfairly hurt by rules designed to rein in megabanks such as Citigroup and Bank of America…. Mr Cohn’s remarks…

suggest that he will be focused on matters such as stress tests and resolution plans, which do not apply to the vast majority of the 6,800 banks in the US.”

We saw this one coming in the CHOICE Act. On the one hand it talks a lot about community banks. On the other, a repeal of big derivatives rules could greatly help large banks in both their daily business and their risk capital calculations. Mr. Cohn appears to be an advocate of changing the rules in favor of the big banks.

The Net Stable Funding Ratio is another one to watch. It is possible that Republicans will end discussion of the NSFR by regulatory directive. The Fed is the regulator for the nation’s bank and a draft NSFR has been in play for some time. A few banks have already baked in the NSFR to their capital calculations, but most haven’t. Adopting the NSFR is going to choke liquidity – we’re pretty sure about that. Postponing the NSFR on a semi-permanent basis would keep the status quo at most banks and free up capital for a few first movers. We don’t think that the House or Senate can tell the Fed what to do, as a bold letter from US Rep. Patrick McHenry, Vice Chairman of the US House Financial Services Committee sought to do at the end of January. But the House can legislate an end to the NSFR just as it legislated life into Dodd-Frank in 2010.

If the rules do change, the big question will be how much balance sheet gets released into the market? Balance sheet will be allocated as capital does not want to sit idle, but it remains uncertain which businesses will actually benefit.

A new proposal for getting non-performing loans at European banks off of balance sheets

The ECB’s Vice President Vítor Constâncio made a lucid, coherent and altogether applaudable speech on the critical need to get non-performing loans (NPLs) off of European bank balance sheets. This is an old problem and one that has hampered Europe’s growth for almost a decade. He used the bad bank idea, which is an old one, but presented it in a way that laid bare the need and mechanics for success.

Constâncio made the case that Asset Management Companies (AMCs) should buy the non-performing loans of European banks. Meanwhile policy makers would standardize information about the loans and let AMCs resell them to investors. There is no Europe-wide mechanism for accomplishing this task, but the ECB can create a model for each national regulator to create their own AMC with public support.

Constâncio notes correctly how serious the NPL problem actually is: “The NPL problem is one of the main reasons behind the low aggregate profitability of European banks. Let me recall here that the return on equity of euro area banks has hovered around 5%, which does not cover the estimated cost of equity.” And the problem just drags on. While some countries like Ireland have gotten their acts together, others have seen an increase in NPLs since 2013. That’s just bad news.

One of the reasons that the US recovered quickly from the Global Financial Crisis of 2008-2009 was that US rules forced banks to write off their bad loans quickly. There was no ability to prolong the agony in the hopes of a

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presentation show that only 36% of NPL is backed by collateral and 46% is covered by provisions.

While NPLs are thought to impact just a few countries, Constâncio notes that the problem is widespread: “The NPL outlook is also very diverse across the euro area. In two countries, Cyprus and Greece, about one-half of total loans are not performing, accounting for about one-third of total bank assets. Four countries report NPL ratios of close to 20%. On the other end of the spectrum, many countries maintain NPL ratios of less than 3%. Despite this heterogeneity, NPLs are a problem with a clear European dimension, as even those countries where banks do not struggle with asset quality, are likely to be affected by spillovers, both financial and real.”

His solution is that Asset Management Companies buy this bad debt with two supporting mechanisms:

1 The creation of clearinghouses that aggregate and disseminate all known information about the loan and its collateral. “This would allow investors to carry out a due diligence at low cost. Bespoke portfolios could be constructed in line with the mandates and objectives of individual investors.” Part of the existing problem is that sellers know what the loans are but buyers have little idea, leading to wide bid-ask spreads. An information clearinghouse would solve this problem.

2 AMCs could securitize NPLs, which could be bought by governments or private entities. “Thanks to the ratings given to senior tranches, a broader group of investors could acquire NPLs.” This sounds like a questionable idea to us since investors could purchase these loans without adequate information (the information is there, but not all investors do full due diligence on securitized issue collateral). But this is Constâncio’s argument, not ours.

However NPLs get off the books of

future turn around. Since European banks had no such requirements, the assets drag on their books. Constâncio notes that “Banks directly supervised by the ECB, still held €921 billion of such troubled loans at the end of

CY GR IE IT PT SI ES MT LV LT AT SK NL LU FI FR BE DE EE EA |6 |13

120

100

80

60

40

20

0

Provisions (as % of NPL) Collateral (as % of NPL)

Provisioning and collateralHigh-NPL countries(I6) and EA:

Broad alignment in terms of coverage ratios and collateral

On average, 46% of NPLs is covered by provisions and 36% by collateral

Source: ECB Supervisory statistics.

50

45

40

35

30

25

20

15

10

5

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

NPL resolution in the euro area has been slowNPL ratios in Europe have slowly fallen from the 2013 peak

Source: World Bank, IMF Financial Soundness Indicators, ECB.

Note: Country samples and methodological di�erences related to NPL de�nitions or the consolidation scope can explain di�erences inratios with respect to supervisory statistics.

• NPL stock: a legacy from the crisis• Peak NPL level in the euro area reached in 2013• NPL resolution is slower in many countries facing high NPL levels

6 EA countries

EA

UK

US

4.8

2.4

0.9

1.4

22.8

6.6

1.0

1.5

IMF data Average NPL ratio (2007)

Average NPL ratio (2016)

CY

CR

IE

IT

PT

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EA

September 2016, representing 6.4% of total loans and equivalent to nearly 9% of the euro area GDP.” Wow.

Not only that, but the collateral for these bad loans is a fraction of the loan value. Data from Constâncio’s

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systems were expert systems. They were designed by engineers and scientists for their peers. Computer users were highly specialized, highly trained and highly technical. Banks and financial institutions were amongst the very earliest adopters of computer technology; systems were designed to perform specific functions and users were expected to be specialists who would receive in-depth training on their new technology. Many bank systems in place today remain from the first or second generation of design architecture.

Some of the characteristics of expert systems are that they are heavy on hard core engineering in the classic sense – speed, capacity, stability and reliability – but very light on flash and dash. They are usually difficult to master, have oddities and quirks in behavior, and it is a significant technical effort to install and to operate them. These systems are now called “legacy” systems, which simply means they have been in place for a long time, with the further implication that they are out of date or outmoded.

Today, banks and others in securities finance don’t have the time or the bandwidth to perform in-depth training on expert systems. Rather, expert systems today need to resemble consumer technology more than ever, not dissimilar from using an Uber or Snapchat app. These consumer systems are specifically designed to be intuitive and easy to learn.

Consumer systems began to emerge in the late 1980s and into the 1990s and really began to take off around the turn of the century. They were targeted at the general public and were designed with a great deal of input from marketing people. A new class of engineer emerged: the design engineer, whose role was to bridge the gap between marketing and technology. Design engineers were augmented by product managers, often subject matter experts drawn from the target

customer base. The characteristics of consumer systems are that they are easy to use, intuitive, easy to implement and easy to manage. The drawback was often that they were light on hard core engineering – slower, less stable and less reliable.

More recently, the distinction between expert and consumer systems in securities finance has blurred. Enormous leaps in the hard core engineering that underpins modern consumer systems have allowed these systems (when properly designed) to be the equal of legacy systems in mission critical measures. New fintech companies moving into the wholesale banking and capital markets space are bringing with them a different approach to the design of their systems, one driven by experience in consumer technology. And even long term expert users of bank technology have developed highly elevated expectations for the systems they use.

If consumer-oriented technology can outperform legacy systems, then there is no question that banks and asset managers will make a change. Equally important is the fact that financial services organizations using an Enterprise support model do not have the bandwidth to maintain and use expert systems. They must find functional consumer systems, and this creates an opportunity for smart incumbents and clever new entrants.

European banks, it has been clear for years that this is a critical step for returning the regional economy to growth. As Constâncio says, “In the medium term, if the entire amount of capital currently tied up by NPLs is used to support new lending, total credit volume in the euro area may increase, in the most optimistic variant, by about 2.5% and up to 6% in the group of six countries with higher NPLs.” This would make a meaningful impact on economic growth in the Eurozone.

Shifting responsibilities in securities finance require a rethink on technology design

A move towards the Enterprise model of bank and investment management means that the expert systems of securities finance history are not viable for the current business models of clients. The pace of change is speeding up for the benefit of vendors, their generalist users and even their expert users.

The issue facing expert systems is that there are now numerous people involved in the securities finance workflow on a part time or peripheral basis. Organizations no longer have top-to-bottom dedicated and full time staff for securities finance. In operations, trade support, settlements and post-trade processes, most firms now use an enterprise-wide center shared with other parts of the bank. The depth of long term expertise in the securities finance process – and their expertise with the systems supporting it – is no longer as robust as it used to be.

In the beginning, all computer

Daniel Tarullo resigns from the Fed (!)

The big impacts from Republican control of the US Federal government just keep coming. On Friday, Daniel Tarullo, Board Member of the Federal Reserve and a major figure in global financial regulation, announced his resignation effective this April, five

...because the conventional way isn’t always the best way.

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the markets. Much of that liquidity proved to be illusory in the sense that when there was an exogenous shock that produced a lot of uncertainty about the value of underlying assets, the buyers, in many instances, just withdrew from the market.

“Having said that, there does seem to be something different in markets, even operating in non-crisis, non-stress periods, as we are at the present. By some metrics, things like bid-ask spreads, doesn’t seem to be too - too very much different. By some other metrics - market depth, the anecdotal information you hear about the - more difficulty, perhaps, in moving large positions - something may - does seem to have changed.”

We’ve been consistently frustrated that Tarullo, who appears insightful in so many ways, never fully accepted the role that regulation has played on market liquidity. There are countless opinions and articles citing these post-Dodd Frank market conditions. He has stuck to his opinion though.

He was also a supporter of new taxes on securities finance transactions (a terrible idea). In testimony before the US Senate Committee on Banking, Housing, and Urban Affairs in 2014, he said “Federal Reserve staff is currently working on three sets of initiatives to address residual short-term wholesale funding risks. As discussed above, the

first is a proposal to incorporate the use of short-term wholesale funding into the risk-based capital surcharge applicable to U.S. GSIBs. The second involves proposed modifications to the BCBS’s [Basel Committee on Banking Supervision] Net Stable Funding Ratio (NSFR) standard to strengthen liquidity requirements that apply when a bank acts as a provider of short-term funding to other market participants. The third is numerical floors for collateral haircuts in securities financing transactions (SFTs) - including repos and reverse repos, securities lending and borrowing, and securities margin lending.”

We didn’t really want much of Tarullo’s thinking or proposals to go through, and now the likelihood of them moving forward is much reduced. That said, we recognize him as a major thinker and leading figure in financial regulation. He’s the type of guy who we really would want to convince to change his position, largely to have his gravitas and support moving forward for markets and regulators to strike a healthy balance of risk management and ample liquidity. As Fed Chair Janet Yellen said in the resignation announcement, “My colleagues and I will truly miss his deep expertise, impeccable judgment, wise insight, and strategic counsel.”

years before the expiration of his term. His departure means that the Fed has lost a major and insightful voice even if we didn’t often agree with him. It also means that Republicans can appoint three new Fed Board governors.

Tarullo stands pretty firm in the camp of a gold standard for bank capitalization and risk management. If you consider the differences of opinion between US regulators wanting banks to hold more capital and Europe/Japan wanting no additions, Tarullo often spoke for the US. Here are some notable Tarullo quotes in recent times:

On December 2, 2016, he offered “a caution against being excessively attracted to simple answers to a set of risks posed by complicated and diverse activities…. I do not think there is a sound economic case for generally weakening the regulatory requirements applicable to the largest banks. And I certainly do not think the taxpayers should bear the risk that would be entailed by any such weakening.”

He must not be pleased with the Financial CHOICE Act at all. No RWA? That’s a definition of simple.

In June 2015, Tarullo spoke about his uncertainty that regulations have been the cause of reduced market liquidity: “Ten years ago, there was an enormous amount of liquidity sloshing around


THE KNOWLEDGE XXXXXXXXXXX

COVER STORY

Amidst increasing demand from investors to generate extra revenues, the global securities finance industry is steadily moving away from a standard agent

lender model and towards a greater diversity of approaches.

BY PAUL AMERY

From Standardisation to Diversity: the State of Agency Securities

Lending



T he trend towards non-tra-ditional securities finance models reflects heavier bal-ance sheet constraints on the bank-owned agent lend-

ers that have traditionally played a cen-tral role in the market. As a result, market participants are seeking more capital-effi-cient ways of conducting securities loans. Meanwhile, actors along the lending and borrowing chain are demanding better and more granular information to inform their decision-making.

Demand to lend meets capacity constraints

Asset owners are increasingly keen to lend their securities. According to IHS Markit, inventories of equities available for loans reached over US$11 trillion in late February 2017, up 21 percent from a year earlier.

“Beneficial owners, whether that be pension funds, sovereign wealth funds, mutual funds or insurance companies, are very keen to identify additional sources of revenue to improve alpha and offset costs, which are rising,” says Paul Wilson, Global Head of Agent Lending Product and Port-folio Advisory at J.P. Morgan.

“There’s a compression of management

fees in the asset management business,” notes Simon Colvin, vice president at IHS Markit.

“Even though the inventories of securi-ties available for lending are at an all-time high, the profitability of lending is hold-ing up because revenues are still growing faster than inventories,” Colvin adds.

According to Keith Haberlin, global head of securities lending at Brown Brothers Harriman, a broadening range of funds is now interested in generat-ing incremental returns through lend-ing. Traditionally, low-fee, low-turnover funds like index funds and ETFs have been a major source of the securities avail-able for loans.

“The ongoing shift from active to pas-sive funds is a big tailwind for securities lending, since it’s an integral part of the low-cost asset management model,” says Haberlin.

“In the US ETF market, 85% of ETFs with annual total expense ratios below 0.5% engage in lending. But this is now prompt-ing active equity managers to take a closer look at securities lending as well.”

According to DataLend, global securi-ties lending revenues exceeded US$9 bil-lion during 2016, with over half of the total generated in North America.

But rising willingness to lend does not by itself generate increased demand from borrowers. And there appears to be some sand in the cogs of the market. IHS Markit’s data show a falling securi-ties lending utilisation rate over the last year, with only 8.4 percent of equity inven-tories being taken up by borrowers in late February 2017, down from over 11 percent a year earlier.

According to Bill Kelly, head of secu-rities finance client relationship man-agement and business development at BNY Mellon, several factors are at play in explaining the slower take-up of loans.

“The securities lending market faces reduced capacity from borrowers, an effect both of new regulations and capi-tal charges on agent lenders, as well as a general trend towards deleveraging,” says Kelly.

For example, under the incoming Basel III capital and liquidity framework for banks, new balance sheet costs are being imposed on agent lenders offering indem-nification to beneficial owners. This indemnification covers clients against potential losses from the default of a counterparty in a securities lending trade.

In the past, indemnification was offered to clients at effectively zero cost for the agent lender.

“Historically it’s been a free offer,” says Jeff Kidwell, director and head of direct repo at AVM Solutions.

“Now that many providers are facing increased capital costs for providing indemnification, some of them are inter-ested in passing them along,” adds Kidwell.

Brown Brothers Harriman’s Haberlin notes that indemnification is a historical oddity.

“The practice of indemnification is unique to securities lending. It doesn’t exist in repo, which is economically a sim-ilar transaction. But it’s hard to convince beneficial owners to give up something they’re used to,” says Haberlin.

“The rising capital costs of indemni-fication for bank-owned agent lenders, combined with demands to meet return on capital targets, are a challenge for the

Region Securities Lending Revenues 2016 (US$m)North Ame 4,671.55 Europe 2,642.72 Asia-Pacific 1,663.31 Other 182.29 TOTAL 9,159.86

Region Securities Lending Revenues 2016 (US$m)North Ame 4,672Europe 2,643Asia-Pacific 1,663Other 182TOTAL 9,160

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

North America Europe

Securities Lending Reve

0

1,000

2,000

3,000

4,000

5,000

North America Europe Asia-Pacific Other

Securities Lending Revenues 2016 (US$m)

Source: DataLend



COVER STORY

whole industry,” he adds. “It’s beginning to play out in terms of differentiated pricing for loans with an indemnity and without.”

“Indemnification requires agents to hold higher levels of capital than before and the costs have gone up significantly over the last 3-4 years,” observes J.P. Mor-gan’s Paul Wilson.

However, a prime broker servicing the securities borrower community expressed uncertainty regarding the extent to which indemnification costs have been reflected in the prices agent lenders charge for loans.

“It’s unclear to what extent the rising costs of indemnification for agent lend-ers are being passed on to us as borrow-ers. From our perspective, there are usu-ally alternative ways of sourcing the same securities, for example by borrowing from non-bank counterparties, by using a syn-thetic structure like a total return swap or by borrowing an ETF and converting it to the underlying assets,” says Bob Zekraus, director of prime services at Scotiabank.

In January 2017, the G20 Financial Sta-bility Board (FSB) pointed out a regula-tory gap in the treatment of securities

lending indemnification, observing that, while bank-owned agent lenders are now required to bear balance sheet charges for offering these insurance policies to clients, agent lenders owned by asset managers face no equivalent costs.

In a set of non-binding policy recom-mendations, the FSB suggested that asset managers may be forced to reinsure the risks created by indemnification, a step that the largest asset manager involved in agent lending, BlackRock, has so far resisted.

In a series of public statements made during the FSB’s consultation process, BlackRock pointed out that it lends secu-rities only from funds managed in-house, rather than competing head-to-head with bank-owned agent lenders. The asset manager also refuted suggestions that its indemnification activities create systemic risk, the main policy concern of the FSB.

Another non-bank agent lender, eSe-cLending, says that its policy is to source indemnification from third parties.

“We’ve always purchased indemnifica-tion insurance from highly rated external insurers. This has been a real and signifi-

cant cost on our balance sheet,” says Chris Jaynes, president and head of client rela-tionship management and business devel-opment at the firm.

Jaynes believes that the trend of increased capital costs for indemnifica-tion could play out in different ways for the investor client base.

“From the client’s perspective, the rising costs of indemnification for bank owned agent lenders leave you with three choices. You pay more in fees, you accept scaled-back legal language for the indemnity or you get lower volumes and revenues,” he says.

New lending models—CCPs and P2P

A direct consequence of the heavier capital constraints on the majority of agent lenders is the search for new lend-ing models. This can mean the structuring of trades in a different legal format, the routing of trades via central counterpar-ties (CCPs) or bilateral, peer-to-peer (P2P) securities lending.

“Some of the market is looking at a more capital-efficient way to undertake business,” says J.P. Morgan’s Paul Wilson.

“This includes consideration of using a CCP or use of a pledge structure rather than a title transfer for collateral. The pledge structure is not the norm outside of the U.S. It’s important to recognize that the traditional lending model—a benefi-cial owner using an agent to lend securi-ties to a borrower, who lends them on to a hedge fund—does contain some excess cost and inefficiencies.”

Jason Strofs, managing director at BlackRock, points out the positive aspects of central counterparties.

“We’re bullish on the future role of securities lending CCPs,” says Strofs. “They provide the most relief under current reg-ulations to the broker/dealers. They also provide benefits for agent lenders, and material pre- and post-trade efficiencies for all participants.”

Scotiabank’s Bob Zekraus quantifies the benefits of the CCP model for a typi-cal securities borrower.

0%

2%

4%

6%

8%

10%

12%

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

Group Lendable (US$ Million) Securities Lending Utilisation Rate (RHS)

Global Equity SL Inventories and Utilisation Rate

Source: IHS Markit

Alternative to Prime Brokerage, let AVM Solutions be your outsourced repo funding desk. Leverage from our extensive experience and global relationships. We can help you diversify and protect your liquidity needs. We can assist you with your collateral management allowing you to focus on your goals.

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expertise to help the institutional investor community in the ever increasingly complex global financial regulatory environment. Specialized front, middle and back office services and innovative solutions for today’s repo and securities lending markets.

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COVER STORY

“From a borrower’s perspective, there’s a huge incentive to face off against a qual-ifying CCP,” says Zekraus.

“Trades via a CCP could potentially carry a risk weight of less than 5%, com-pared to 20% for a trade with a bank and 100% for a trade with a broker/dealer.”

But some market participants note that, compared to the mandatory clearing of standardised bilateral derivatives, some-thing that regulators pushed for immedi-ately after the financial crisis and put into effect only a few years later, CCPs for secu-rities lending have been slow to arrive.

“Securities lending CCPs are taking a lot longer than expected to go live,” says AVM’s Jeff Kidwell.

“It’s hard to tell whether the regulators are behind the initiatives or not, depend-ing on whether the CCPs are meant to be exclusive of buy-side clients or inclusive of buy-side clients. The CCP plans that just include broker dealers and money market funds don’t seem to have as much traction as the projects that are all-to-all.”

Mirroring developments in the deriv-atives market, securities lending CCPs are likely to emerge on a regional basis, according to Dave Martocci, global head of agency securities lending at Citi. Mean-while those routing their future business via CCPs will need to play close attention to legal structures, Martocci points out.

“A single securities lending CCP for the global marketplace is not likely,” says Martocci.

“If the CCP model ever takes off, we’ll probably need three regional hubs for the US, Europe and Asia.”

“There’s still a tremendous way to go. We need a recognisable, true and tested CCP product that is easy to sell to clients. From our own risk perspective, we need to ensure that there are adequate con-trols and we have perfected interest in the collateral, especially if a client needs indemnification.”

The growth of P2P securities lend-ing will depend primarily on the speed at which operational structures can be reformed, says eSecLending’s Chris Jaynes.

“Many participants in the P2P market

have program guidelines and credit approval processes that were designed for dealing with traditional banks and broker/dealers,” says Jaynes.

“There often need to be changes to client guidelines or internal credit approv-als to deal with non-bank peers. It’s not something you can do wholesale, quickly. It takes time to build up a bigger network of counterparties.”

But the long-term prospects of P2P securities lending are bright, says BNY Mellon’s Bill Kelly.

“P2P lending offers a way of resolving the liquidity conundrum, specifically by bringing to market the high quality liquid assets required by asset owners as initial and variation margin on centrally cleared trades,” says Kelly.

“The P2P model also helps connect non-traditional counterparties.”

“Our role as a collateral agent, together with our connectivity as a large custodian and agent lender, puts us in a strong posi-tion to act as a hub for P2P trades. Up to now many P2P marketplaces have been bespoke and not scalable.”

The rising importance of data With the steady move away from the

traditional agent lender model, data and analytics are playing a much more impor-tant role in the securities finance business.

“Securities lending programmes have become much more complex,” says Nancy Allen, global product owner at DataLend.

“Now, more than ever, transparency has become increasingly important for all parties to ensure they capture optimal value across their programs. Data brings transparency and has started to be treated as an asset by agents, borrowers and ben-eficial owners,” says Allen.

“We’re really focused on data,” says BlackRock’s Jason Strofs.

“It’s important to have access to the right information and to be able to per-form research on it. As the collateral land-scape continues to change, we are also hopeful that data providers can continue to improve the quality of the data.”

At the same time, beneficial owners

have started to ask their service provid-ers much more probing questions about their lending programmes, says Melissa Gow, director at IHS Markit.

“They have become a lot more sophisti-cated in the questions they ask their agent lenders,” says Gow.

“Beyond the returns achieved, they now need a much more granular under-standing of their transactions, whether it’s securities lending rates, levels of utili-sation, the asset class or the counterparty involved.”

But ensuring consistency in the inter-pretation of data remains a hot topic. DataLend’s Nancy Allen gives an example of her firm’s approach.

“We’ve focused our efforts on bringing standardization to performance measure-ment,” says Allen.

“In the past beneficial owners using multiple agent lenders may have found it hard to interpret data as the analyses they received were based on non-stand-ard peer groups. All peer group analysis and matching is controlled by DataLend to ensure consistency.”

And coping with the market’s increas-ing diversity is a business, not just a data issue, says Allen.

“A challenge for those involved in secu-rities lending is to achieve efficiencies of scale across so many different sets of guidelines and client types.”

Teamwork and dedication are essential to the success of any organization. They are hallmarks of how we work with our securities lending clients and the standard by which our clients judge us.

We understand that by serving our clients well, our own success will follow.

To learn more about the capabilities, please contact Chris Bodner (617-204-2412) / Mark Whipple (617-204-2451) / Michael Furnival (+44-20-7774-8762) or visit us at gs.com.

© 2017 Goldman Sachs. All rights reserved.



FEATURE

Looking for liquidity? You’re not alone. The 2008 financial crisis and resultant regulatory reform are having a continuing impact on traditional sources of market liquidity. Liquidity encompasses both the ability to source cash and

securities for portfolio management purposes and the increased need for collateral. Meanwhile, the demand for collateral is growing. With these complex dynamics, market participants may seek additional avenues to find the liquidity

they need. It’s a challenging time, but the good news is that the market is adapting and creating new sources of liquidity for you to consider.

BY BILL KELLY, GLOBAL HEAD OF AGENCY SECURITIES FINANCE, BNY MELLON

Securities Finance: A Source of New Liquidity Options



Banks and broker dealers have traditionally intermediated in the market to provide liquid-ity, but regulation is changing the way these providers inter-

act with the market. Balance sheet man-agement discipline has reduced capacity and is making broker-dealers more selec-tive in their repo transactions and coun-terparties. Bank liquidity facilities may not be available or can come at a higher cost point. If these liquidity sources are unavailable, what other routes to market are open to you?

Explore the Liquidity WaterfallAs you seek additional liquidity options,

it can be helpful to review what we refer to as the liquidity waterfall. The liquid-

ity waterfall illustrates a variety of inter-operable liquidity options, some familiar and others that may be new to the market, and identifies the relative cost of each option versus its durability. By durability, we mean the degree of certainty that this liquidity source will be available to you when you need it.

At the top of the waterfall are internal, self-sourcing liquidity options such as cash and securities held in your portfo-lio that can be used to collateralize trans-actions. These are the sources of liquid-ity with the lowest cost, but they vary in terms of their dependencies. Cash held in your portfolio might be unavailable when needed because it is otherwise committed. Securities held in your portfolio may be a lower cost option for liquidity, but they

might not be eligible collateral. You can also find liquidity outside of

your portfolio by participating in an array of securities finance options, including secured term financing, securities bor-rowing or exploring how an agency lend-ing program could be a source of collat-eral or liquidity. As you move in this direc-tion along the waterfall, cost may begin to increase but so does the certainty associ-ated with these liquidity channels, which include:

• Cash release (client managed cash) –Through this BNY Mellon program, a portion of cash collateral posted by the borrower in a securities lending transac-tion may be released to the client for their use. *

The Liquidity Waterfall

Eligible Securities

Cash Securities & Cash1 Cash Release

Exchange Ineligible to Eligible Reverse

Repo

Hybrid “Transformation”3

Secured Financing4

Liquidity: Less Certainty Cost: Lower

Liquidity: Greater Certainty Cost: Higher

1.De-fragment across legal entity/portfolios and efficiently allocate eligible securities and cash. 2. Not available in all markets 3. Cash or securities provided through structures including: Closed End Fund, ETF, Exchange Traded Repo, Syndication. May be lower capital costs versus a bank. Structure may facilitate liquidity in stressed markets. 4. Financing from Loan/Repo secured by eligible securities posted as collateral. Consider strength of balance sheet/liquidity.

Collateral Exchange

Borrow Plus2

INTERNALLY SOURCED

EXTERNALLY SOURCED

In Portfolio Optimization Agent Lending Agent Lending Agent Lending Principal Lending Hybrid Committed Credit

Securities Finance Activities

Liquidity

Cost

The Liquidity Waterfall



FEATURE

• Exchanging ineligible collateral for eligible collateral (collateral upgrade) - Securities lending may also help trans-form securities which may be ineligible to be used as collateral on certain exchanges/clearinghouse into eligible securities.

• Repo – Counterparties can poten-tially enter the repo market facing BNY Mellon as agent for its lending clients to raise cash using securities as collateral.

• Collateral Exchange – Collateral exchange transfers collateral between legal entities within your organiza-tion. Through a bespoke agreement, the legal entities lend and borrow from each other, while BNY Mellon could provide third party middle office administrative support.

Moving further along the waterfall, liquidity can also be sourced from prin-cipal lending. At BNY Mellon, this is our BorrowPlus® program** in which client-borrowers borrow securities to facilitate short sales using cash and securities as collateral. Hybrid transformation, or the peer-to-peer model, is next on the water-fall. Under this model, asset owners inter-face with each other to source liquidity thereby trading with counterparties with balance sheet capacity. The peer-to-peer model is gaining momentum, and invest-ment managers are transacting outside of the credit intermediation provided by bank financing desks. At BNY Mellon, we are selectively adding asset owners as borrowers in our agency securities lend-ing program. In addition, it will be valu-able to expand this capability and effec-tively create a marketplace for this activ-ity to occur. More and more, the market may find peer-to-peer lending essential as demand for liquidity increases while bank and broker-dealer capacity to intermedi-ate is reduced. At the end of the water-fall, there is BNY Mellon’s secured term financing option which can help borrow-ers use their long assets as collateral to access funding.

Innovation at WorkThe liquidity waterfall shows how

innovation comes in different forms.

Sometimes innovation means creat-ing something brand new, but it can also involve adapting a current capabil-ity to address new challenges. For exam-ple, agency securities lending contin-ues its role as an alpha generating tool, helping portfolio managers earn incre-mental income on their portfolios. How-ever, along the liquidity waterfall, agency securities lending has adapted to help cli-ents access liquidity in the market. As we review the liquidity waterfall and explain the different options, clients often appre-ciate this innovation, how components of traditional financial market capabilities, such as agency securities lending, can be combined and aligned around solving a new market challenge.

Open to New Options We’re finding that our clients are open

to looking at new ways to source liquid-ity along the waterfall. Regulatory imple-mentation, as presently contemplated, has our clients assessing their invest-ment strategies against available liquid-ity options and regulatory requirements. Have the cost and availability of bank liquidity facilities become prohibitive? Is there a desire to change risk/hedg-ing strategies based on BCBS/IOSCO OTC derivatives initial margin and variation margin requirements? The result of this assessment may be a desire to have a vari-ety of available liquidity options in which you are able to rotate in and out of seam-lessly to tailor the most efficient liquidity profile for your business. This is especially important in times of market stress. If one liquidity option dries up, a client can toggle to another source of liquidity. With plenty of options, and the ability to imple-ment these different options efficiently, clients can spend more time focusing on the business rather than chasing liquidity.

As you explore the waterfall, you may find that certain options fit into your cur-rent business model better than others. The waterfall is modular, so you can choose the options that work for you. You can move in and out of each option to keep pace with portfolio, funding and market

changes. However, the ability to transition efficiently between liquidity options can be hampered by structural challenges. A decentralized structure, with assets held in different accounts scattered through an organization, may not be able to take advantage of some options along the waterfall. There can also be internal legal and policy constraints that need to be addressed before you can move forward with a new liquidity option. Each market participant will have to work through these challenges when searching for new liquidity channels.

Where is the Market Going?The market is requiring more trans-

parency and connectivity around liquid-ity. With transparency, you can see where the liquidity may reside. With connec-tivity, you can access this liquidity effi-ciently. There is also the issue of scalabil-ity. As you move along the waterfall, some options are still gaining a foothold in the market. How will these liquidity options perform when there is a critical mass of participants? Technology and legal struc-tures will need to evolve to help enhance transparency, connectivity and scalabil-ity. There are many market players driv-ing this evolution, from small niche com-panies to large financial service provid-ers, and helping the market solve for the liquidity challenge.

*Subject to credit approval by BNY Mellon

**Not available in all markets.The views expressed within this article

are those of the author only and not nec-essarily those of BNY Mellon or any of its subsidiaries or affiliates, which make no representation as to the accuracy, com-pleteness, timeliness, or fitness for a spe-cific purpose of the information provided in this document. Material contained in this article is intended for information purposes only and not to provide profes-sional counsel or investment advice on any matter. No statement or expression is an offer or solicitation to buy or sell any products or services mentioned.



How do you reduce fees without compromising your core strategy? This age old commercial challenge is one now facing the asset management industry. Study after study has shown that funds with the lowest fees consistently outperform

those with higher fees, and are attracting more inflows as a result.

BY JOHN WALLIS, CO-HEAD OF GLOBAL SECURITIES LENDING – EUROPE, BROWN BROTHERS HARRIMAN

When Seeking to Reduce Fees, Every Basis Point Counts

Asset Managers Revisiting Securities Lending as Fee Pressure Bites

The worldwide market in 2016 witnessed investors

withdraw $92 billion from actively man-aged funds while investing $625 billion in ETFs and other low cost passive products.1 Morningstar research has shown that 95% of all flows over the last decade have gone to funds in the lowest cost quintile.2

And if competitive pressures weren’t tough enough, regulators across the globe are issuing proposals and rules that emphasize product costs and shareholder fees. In the US, the Department of Labor’s Fiduciary Rule is likely to drive advisor managed retirement assets to lower-cost products. In UK, the Financial Conduct Authority delivered tough conclusions on the charging, performance and trans-parency of the actively managed funds sector, and while the report’s conclusions are hotly debated, other European and Asian regulators are already launching similar reviews.3

A Level Playing Field?The challenge for active managers in

particular is that the core components of their strategy

simply carry more cost than their pas-sive equivalents. By its very nature, active management requires more investment expertise that needs to be paid for. On

top of that, portfolio turnover is often far higher for active managers, with the increased amount of buys and sells rep-resenting 10-20 bps4 of cost ‘drag’ alone to the average active fund according to Morningstar.

While these costs can always be man-aged, there is realistically little room for most active asset managers to do so with-out compromising their core strategy. There are some other steps active man-agers can take and still stay true to their core approach. These are not in the port-folio management process itself, but in the post trade, operational domain where techniques such as efficient FX execution, portfolio hedging, and securities lending can help active managers keep more of the performance they are generating, and reduce fees.

Every Basis Point CountsOften overlooked by active managers as

either ‘not worth it’ or potentially detri-mental to their

investment objectives, securities lend-ing can generate a valuable revenue stream to offset some of the higher man-agement fees and trading costs associated with active management.

Consider the iShares Russell 2000 ETF, which has generated more income from lending than it charges investors. In other words, investors are effectively “paid” to own the ETF by fully collateralized loans

of securities. Even if the average return for most funds is closer to 5-10bps, this, like the impact of higher turnover, compounds over time into real money. Because of this, securities lending has become central to the low cost passive approach with 95% of the lowest cost ETFs engaging in the prac-tice.5 Why then would active managers still be reluctant to engage?

Not Built for Me?Active managers that have felt securi-

ties lending isn’t designed for them are right – it mostly isn’t. 85% of securities on loan are sourced from sovereign wealth funds, banks, pension plans and insur-ance companies, with surprisingly only 15% from asset managers.6 Consequently, most securities lending programs have not been designed to cater to the needs of asset managers, who because they make the ultimate investment decisions, tend to pay closer attention to the potential impact of lending. If asset managers are going to embrace securities lending more widely, they need a different approach to the standard offering, which all too often seeks to maximize total returns through large balances on loan combined with a flexible collateral policy.

Tailor for Best EffectMost equity funds can generate the

majority of their lending revenue from less than 2%-3% of their assets (by com-



FEATURE

parison, some industrial scale programs may put over 50% of a portfolio on loan). By focusing on lending a handful of high-fee loans, the potential for operational disruption is reduced substantially and because the intrinsic value of the loan itself is adequate enough to generate an acceptable return, taking further credit risk with the collateral is unnecessary.

Also, the industry is now more trans-parent, with better data, and more flex-ible technology than ever before, allow-ing managers to address the question of whether lending will conflict with their core investment objectives. The short answer is that it should not if constructed correctly. An agent specialized in servic-ing asset managers will be able to lend within detailed specified parameters and if even more control is required, pre-trade tools can be made available which allow managers to selectively approve individ-ual loans based upon the estimated rev-enue potential, as well as the broader considerations of that loan. Examples of such are the manager’s position versus the overall availability of assets in the lend-ing market, and the correlation between securities on loan and share price. In other words, asset managers no longer need to accept a choice of either handing over their portfolio to an agent to lend at their discretion, or not lending at all.

Securities lending is not of course a singular solution to the challenges of fee compression. No asset manager lends securities because the revenues are large enough to correspond to those of a well-

executed investment strategy. Lending returns will always be incremental rather than game changing. However, asset man-agers who lend would all agree that lend-ing revenues are a vital component in off-setting costs and enhancing investor returns, as evidenced by the largest ETF managers who employ lending today. We will give the last word to the CIO of one the world’s largest and fastest growing asset managers:

“We believe in alpha (outperform-ing the market through active manage-ment) as well as beta (tracking the market through passive management). But we have delivered alpha because we have low fees. I don’t care how good you are, it is dif-ficult to produce alpha with high fees.”

And in this respect, every basis point counts.

References: 1 Twelve months ended December 2016. Source:

Morningstar.

2 Morningstar, 2015 Fee Study: Investors Are

Driving Expense Ratios Down, April 2015.

3 FCA Asset management market study, Terms

of Reference. November 2015.

4 Kinnel, Russel. “It’s Flowmageddon!”

Morningstar.com. 7 Apr 2016.

5 Predictive Power of Fees, Why Mutual Fund

Fees Are So Important, May 2016.

6 ISLA SL report 9th April 2015 Distribution copy

1.0.

This article is provided by Brown Brothers Harriman

& Co. and its subsidiaries (“BBH”) to recipients, who

are classified as Professional Clients or Eligible

Counterparties if in the European Economic Area

(“EEA”), solely for informational purposes. This does

not constitute legal, tax or investment advice and is

not intended as an offer to sell or a solicitation to

buy securities or investment products. Any reference

to tax matters is not intended to be used, and may

not be used, for purposes of avoiding penalties under

the U.S. Internal Revenue Code or for promotion,

marketing or recommendation to third parties. This

information has been obtained from sources believed

to be reliable that are available upon request. This

material does not comprise an offer of services. Any

opinions expressed are subject to change without

notice. Unauthorized use or distribution without the

prior written permission of BBH is prohibited. This

publication is approved for distribution in member

states of the EEA by Brown Brothers Harriman

Investor Services Limited, authorized and regulated

by the Financial Conduct Authority (FCA). BBH is a

service mark of Brown Brothers Harriman & Co.,

registered in the United States and other countries. ©

Brown Brothers Harriman & Co. 2017. All rights

reserved. 3/3/2017.

John Wallis serves as Co-Head of Securities Lending, EMEA and Head of Securities Lending Sales and Relationship Management, EMEA at Brown Brothers Harriman (BBH). Mr. Wallis has been with the firm for eight years and is based in London.

Prior to his current role, Mr. Wallis was responsible for BBH’s Infomediary® business in Europe and Asia. During this time, he was closely involved in BBH’s fund automation initiative in Asia. Mr. Wallis also played an integral role in the successful introduction of Infomediary applications for transparent for-eign exchange execution, corporate action processing and financial messaging.

CPRCLIENT PERFORMANCE REPORTING

STANDARDIZING PERFORMANCE MEASUREMENT

BY DATALEND

EquiLend LLC, EquiLend Europe Limited, EquiLend Canada Corp. and EquiLend Clearing Services are subsidiaries of EquiLend Holdings LLC (collectively, “EquiLend”). EquiLend LLC and EquiLend Clearing Services are members of FINRA and SIPC. EquiLend Clearing Services is registered with the SEC and FINRA as Automated Equity Finance Markets, Inc. EquiLend Europe Limited is authorized and regulated by the Financial Conduct Authority. EquiLend Canada Corp. is authorized and regulated by IIROC. All services o� ered by EquiLend are o� ered through EquiLend LLC, EquiLend Europe Limited, EquiLend Canada Corp. and EquiLend Clearing Services. EquiLend and the EquiLend mark are protected in the United States and in countries throughout the world. © 2001-2017 EquiLend Holdings LLC. All Rights Reserved.

OUR INNOVATION. YOUR ADVANTAGE.

EquiLend LLC, EquiLend Europe Limited, EquiLend Canada Corp. and EquiLend Clearing Services are subsidiaries of EquiLend Holdings LLC (collectively, “EquiLend”). EquiLend LLC and EquiLend Clearing Services are members of FINRA and SIPC. EquiLend Clearing Services is registered with the SEC and FINRA as Automated Equity Finance Markets, Inc. EquiLend Europe Limited is authorized and regulated by the Financial Conduct Authority. EquiLend Canada Corp. is authorized and regulated by IIROC. All services o� ered by EquiLend are o� ered through EquiLend LLC, EquiLend Europe Limited, EquiLend Canada Corp. and EquiLend Clearing Services. EquiLend and the EquiLend mark are protected in the United States and in countries throughout the world. © 2001-2017 EquiLend Holdings LLC. All Rights Reserved.



FEATURE

While collateral decisions are not viewed with the same degree of concern as five years ago, they remain a central part of

any asset manager’s thinking when engag-ing in securities lending or repo. Regula-tion stands at the center of changes in col-lateral market practices, and its ramifica-tions impact nearly every aspect of the col-lateralized trading markets. This survey presents asset manager views on collateral management, including cash collateral policies, separately managed accounts, repo scarcity and accepting equities as collateral.

MethodologyFinadium’s 2016 survey of asset man-

agers covered many aspects of securities lending and collateral management with an emphasis on potential decision making going forward. We were particularly inter-ested in how asset managers viewed col-lateral management; how important really is indemnification in maintaining a successful program; and how far are asset

managers willing to stretch to meet bank borrowing preferences for non-cash col-lateral? The transition to new money fund rules in the US was also a frequent topic of conversation.

Our survey covered US$19.9 trillion in AUM across the 30 asset management firms (see Exhibit 1). The AUM total is down 23% from last year’s survey; this is the result of our including more mid-sized firms this year and not pursuing the largest firms solely for their AUM. Our interviewees’ average size was US$664 billion. The 36 executives we spoke with were spread across institutions in the US, Canada and Europe.

Collateral Investment and Acceptance Policies

The opinions of asset managers towards their cash and non-cash collateral policies can be summed up as conserva-tive, but after that there is a wide variation in ideas, strategies and implementations of collateral policies. Some managers are comfortable with investing cash beyond money market fund investments while

others want only overnight repo. Some managers will accept equities as non-cash collateral while others will only take gov-ernment bonds. In this section, we present the disparities evident in our survey data and attempt to draw broad conclusions on the direction of collateral acceptance in securities lending and repo.

Asset managers continue to predom-inantly manage their securities lending collateral themselves as opposed to pen-sion plans and sovereign wealth funds, which prefer that their agent lenders and custodians manage cash and non-cash on their behalf. This year we found that 65% of the firms we spoke with were the primary managers of their own cash col-lateral (see Exhibit 2). This included large asset managers with their own affiliated custodians and agent lenders. For cash col-lateral, it remains an industry standard for fund managers and insurance com-panies to manage cash internally if they have the capabilities.

The cash collateral holdings of asset managers fluctuated from 2015 to 2016, the result of money fund reform forcing asset

Collateral management in securities finance remains a robust practice and asset managers appear to be taking all the right steps to appropriately manage their risk exposure. The markets are changing

however, and managers should consider the knowns and unknowns in their future planning.

Asset Managers on Collateral Management in Securities

Lending: Survey Results and Best Practices

BY JOSH GALPER, MANAGING PRINCIPAL, FINADIUM



0

20

40

60

80

Internal/affiliate Unrelated agent

0

5

10

15

20

25

Total Under US$250B US$250B to US$1T Over US$1T

30 firms

12 firms

13 firms5 firms

Exhibit 1:Assets under management of firms we interviewed (US$ trillions)

Source: Finadium

Exhibit 2:Affiliation of asset managers to primary securities lending collateral managers(Percent)

Source: Finadium



FEATURE

In order to cover the costs of indemni-fication and still earn a return on a low intrinsic value GC loan, asset managers must place their cash in assets that gen-erate enough income to cover bank cap-ital costs and still produce income. This is entirely acceptable for some manag-ers and unacceptable for others, depend-ing on their risk tolerance. We found no one trend across the executives we spoke with that would support the idea of the industry moving one way or another on this decision. Some managers thought it a good plan to keep cash in a government repo fund and simply reduce lending pro-gram activity if no collateral investments were available; this view was not widely

managers to make new decisions about their cash management vehicles. The popularity of 2a-7 prime money market funds decreased from 75% last year to 65% in 2016, while the percent of managers in overnight repo funds was unchanged (see Exhibit 3). The number of managers investing more aggressively than a 2a-7 prime fund declined slightly. Since asset managers can select more than one choice for how their cash is managed, the data suggest a shift in some cash from prime vehicles to more conservative options at managers that previously utilized both types of investment strategies. We expect our 2017 survey to find a still increased usage of government money funds over 2a-7 prime funds.

SMAs vs. Money Funds for Cash Investments

Why would a manager invest cash in a separately managed account (SMA)? According to several executives, the answer is both safety and revenue. In a SMA, managers have full control over

their scope of investments. Investments may be the same as a government bond fund but if a manager would like to expand their range a bit then there is no need to seek out an alternative fund structure: the SMA can accommodate the change. On the revenue side, one man-ager cited the spread between a govern-ment money fund and an SMA at 70 bps as banks pay more to issue longer-dated maturities. This is sufficient to warrant whatever additional risk was incurred, and that risk is seen as very slight.

For investors seeking to lend out Gen-eral Collateral (GC) balances, reduced returns in some portfolios again suggest that SMAs may be a better alternative.

0

20

40

60

80

Overnight 2a-7 or similar Greater duration or risk than 2a-7

2014 2015 2016

Exhibit 3:Securities lending cash collateral investments of asset managers (Percent)

Source: Finadium

“Securities lending cash will continue to move to Separately Managed Accounts

(SMA). The current spread between a government fund and a SMA is 70 bps.”

- Collateral Manager, North American asset manager



shared in the industry however.US cash managers have carefully con-

sidered the consequences of money market reform, including Floating NAVs and the potential imposition of liquid-ity gates on 2a-7 funds. While some have decided to move to government money funds (which earned a return of 0-1 basis point in 2015), other funds are staying with their prime institutional 2a-7 funds including a Floating NAV. This latter strategy appears most successful for fund managers that control the prime money fund themselves. Executives noted that in the event of a liquidity crunch, the same Boards that oversee the lending funds also oversee the cash funds. They will be making the decision about whether to impose fees or liquidity gates. One fund has a legal opinion that if the only inves-tors in the Floating NAV fund are other funds in the same complex and all funds are managed by the same Board, then the Board may never need to impose any type of gate whatsoever.

By keeping cash decisions in-house, managers believe they are best protected from any adverse consequences in their securities lending programs. And in prac-tice, so far managers have never seen these Floating NAV funds float anyhow, although past practice may not be an indi-cator of future events. However, for asset managers outsourcing cash collateral management, the move to a Floating NAV with gates was much less attractive; we found few fund managers that planned to use an external Floating NAV fund for their cash collateral investments.

Repo ScarcityAnother reason for considering a SMA

is the scarcity of repo issued by banks. Repo availability was the biggest concern for cash investment desks for securities lending collateral as well as cash invest-ments in general. This is no trivial matter; repo availability has been questionable for some time and is acute at quarter end.

New changes to the structure of the US repo market have made repo scarcity dif-ficult for certain types of funds. Govern-

ment bond repo that used to be available late in the day is no longer there, mean-ing that funds no longer have an option to place cash in repo late in the day. Equity repo is one alternative, but this is a clear expansion of risk that must be carefully considered and accepted by a fund Board. Some funds simply look at equity, ABS or other repo types as unsecured exposure to the issuer. For investors used to the safest, most risk-free asset classes, the loss of gov-ernment bond repo means that important choices must be made about a fund’s risk profile.

Some asset managers have taken mat-ters into their own hands by purchasing US Treasury and similar repo directly from other asset managers and insurance companies. These transactions, known as Peer to Peer (P2P), introduce a limited set of new risks to the trade. If a cash investor is willing to transact with a highly rated bank, what then is the material difference in transacting with a highly rated fund complex or insurance company? Asset managers say the answer is not much, if any. This is an area of the market that could grow substantially in the coming years.

“Since our funds are the only investor in our cash collateral Floating NAV fund, we understand

that we would never need to impose gates or redemption fees on ourselves. We would also

not be subject to a run from our own funds that would cause a gate.”

- Treasury Manager, North American asset manager

“We look at equity, ABS and other repo

as simply unsecured exposure.”

- Cash Manager, North American asset

manager

Equities as Collateral Asset managers understand the bor-

rower desire to post equities in securi-ties lending transactions but that doesn’t mean they like it. We found 33% of respondents reporting that they already take or would accept taking equities as collateral in theory, but 60% who were opposed (see Exhibit 4). Only 7% were uncertain.

“Equities maintains our attractiveness as a lender in the queue but it’s not what we

thought it would be from a revenue

perspective.”- Securities Lending Manager, European

asset manager

Among the 33% who accept or would accept equities, the prevailing notion was that equities is a means to stay in securi-ties lending. It is not a play to increase rev-enues, although some thought that might occur when starting out. Rather, brokers continue to select lenders based on collat-eral acceptance criteria and are not offer-ing rates much higher than for collateral against government bonds or cash. Man-agers are also clear that any equities or corporate bonds must be credit-worthy: one manager noted that while they are willing to accept a variety of corporate bonds and equities, the security must be



FEATURE

Positive33%

Negative60%

Uncertain7%

Exhibit 4:Asset manager sentiment on accepting equities as securities lending collateral

Source: Finadium

backed by a real company. Nothing too exotic would be anywhere near accept-able. The expansion of the High Qual-ity Liquid Asset (HQLA) trade is typi-cally against equities, and this trade has become a big part of some manager lend-ing programs.

While European managers understand the idea of accepting equities, US manag-ers are now being introduced to the con-cept. Regulatory restrictions on accepta-ble collateral remain the biggest hurdle for US managers, although a broker working group remains active with the US Securities and Exchange Commission

to get 15c3-3 collateral rules changed. This would open the door to ’40 Act mutual funds being able to accept equities, but it does not mean that their Boards will adopt the idea quickly. US insurance companies note other hurdles: National Association of Insurance Commissioners (NAIC) cap-ital requirements have a rating of zero for government bonds (i.e., government bonds are risk-free) compared to five for

“Equities let you get the loan done instead of

being shut out.”- Securities Lending Manager, European

asset manager

“My hunch is that at first our Boards will be

against equities, but with education and time they will come

around.”- Securities Lending

Manager, North American asset

manager

“The statutory impact of accepting equities

would be too much for an insurance company

like ourselves to accept.”

- Treasury Manager, North American asset

manager

equities (cash must be held against the risk). Too much equity acceptance at a US insurance company could have a mean-ingful impact on capital requirements, which could be unacceptable relative to the return.

The growth of equities as collateral in securities lending is likely to occur despite the concerns of asset managers, who will adapt to the times in order to maintain their securities lending revenues. Man-



agers who face extra operational work or capital requirements may ask for higher rates and may or may not receive them from borrowers. This is part of the new transition in pricing and lender/borrower dynamics that is being felt throughout the industry.

Beyond the risk of individual firms accepting equities, asset managers noted a macro concern about where the rise of non-government bond collateral may take the market. When the problem with Lehman Brothers and the Global Finan-cial Crisis was cash collateral, managers were very pleased with non-cash. The next time around, managers wonder how liquid equities truly are in a time of crisis, whether holding equities in a fixed income portfolio is a good idea at all, and how to protect against a liquid market but rapidly depressed or gapped pricing. There is no easy solution here, but man-agers do wonder if equities and other non-cash collateral are the cause of the next crisis in financial markets.

Safe in the Silo, for NowMany asset managers in securities

finance see collateral as a siloed activity away from non-cleared derivatives mar-gining. From their own perspectives, col-lateral in financing transactions is a secure activity made safer by transparency and a move towards only overnight cash reinvestments and government bonds as collateral for securities loans. While the revenues associated with these conserva-tive options is lower than what could be

“The Lehman issue was cash reinvestments, but who knows in a time of crisis with

equities as collateral if that becomes a new

problem.”- Securities Lending Manager, European

asset manager

“I am concerned when there is a crisis how liquid are equities and how to protect

against a sharp drop in pricing.”

- Securities Lending Manager, North American asset

manager

achieved with even a slight move towards more relaxed cash investment standards or a willingness to accept corporate bonds and equities, asset managers can also rest soundly knowing that as much risk as pos-sible has been removed from their pro-grams. Asset managers are safe in the silo of collateral management in securities finance – for now.

The looming danger for asset managers is that their secure decisions in isolation may translate into broader impacts for the markets and their service providers, and that external forces pushing on col-lateral may make their safe choices either unattainable in practice or result in still reduced revenues. While the end result of continued waves of regulation hitting the markets is uncertain, some already observed and possible outcomes are:

• Large amounts of cash collateral moving into government bond funds fur-ther reduce revenues for those funds as

more cash seeks a finite amount of supply. In the case of overnight government bond repo, that supply continues to shrink.

• A lack of repo availability means that without flexibility, some asset manag-ers reduce lending due to a lack of accept-able collateral reinvestments.

• A need for substantially more col-lateral in non-cleared derivatives transac-tions could mean less collateral available for securities loans unless borrowers are willing to accept equities or other less con-servative collateral, or move on to central counterparties. This will not be a question of receiving a higher fee for these transac-tions, but rather a question of whether a borrower will transact at all.

Smart planning in collateral manage-ment for securities lending programs should now include options to account for what-if scenarios, one or more of which is likely to occur in the near future. The silo has been a fine place to be but it won’t be secure forever. Collateral management in securities lending continues to inter-act with other collateralized trading activ-ity and impact market liquidity across a range of traded products. This trend will only continue going forward.



FEATURE

Sponsor Interviews: Why Participate in Finadium’s Investors in Securities Lending

Conferences?J.P. Morgan’s Paul WilsonWhy has J.P. Morgan decided to participate in the Finadium Investors in Securities Lending (FISL) conference?

Finadium has taken a fresh approach to industry conferences and has designed its London and New York events to foster timely and pertinent conversation within the beneficial owner community. This is particularly important as financial mar-kets continue to change at an accelerated pace. With a compelling agenda and a convenient location, I expect the confer-ence should attract industry leaders and key stakeholders and give us all a chance to network and exchange information.

Why do you think clients will benefit from attending?

The agenda was developed to challenge conventional thinking and attitudes, and was created through a close collabora-tion between Finadium, J.P. Morgan and the other sponsoring organizations. Our shared goal was to create a forum where asset managers, asset owners, sovereign wealth, industry association and consult-ants can debate industry-critical topics and share ideas.

Do you see new opportunities for clients in financing markets?

Yes. Securities financing is increasingly central to the efficient operation of global capital markets, and we are seeing ben-eficial owner participation rates reach historic highs. With investors searching for additional revenue against the back-ground of low interest rates and rising

costs, the challenge is to optimize reve-nue in an era of constrained borrower demand and the increasingly tactical nature of trading. This is no longer a ‘one size fits all’ market. However, we believe it retains high potential for clients who are committed to unlocking the potential of their portfolios by working closely with their providers. I think it’s the right time for these events: we’re excited about the discussion and we hope to see a lot of our clients and industry partners there.

AVM’s Jeff KidwellWhy has AVM Direct Repo decided to participate in the Finadium Investors in Securities Lending (FISL) conference?

AVM, L.P., founder of Direct Repo, has decided to engage based on a number of

008109_GB1_Ad_Sec_Fin_Mon_FISL_outline_216x279mm_v2_CP.indd 1 2/13/17 3:07 PM



FEATURE

reasons, including a new focus and format for the conference, the Finadium name, and the opportunity for us to be heard in a forum of forward-thinking institu-tions. Some industry conferences roll out the same topics, panels, and speakers. The attendees get tired of the same pitches for panel and sponsorship.

This Finadium conference offers a completely different perspective on cur-rent issues. We all know about new reg-ulations, but we are challenged to take the next step: what are the products and markets that offer opportunities now? The FISL conference, like Finadium itself, tends to ask the tough questions like what CCP efforts and central clearing are really accomplishing? Where are we on Basel III? What realistically could the Repub-licans and President-elect Trump actu-ally roll back of Dodd-Frank? What is the scorecard for Triparty Repo?

AVM, with its Direct Repo and Direct Lending products, is uniquely positioned between cash provider and collateral pro-vider clients, broker/dealers and regula-tors. We look forward to engaging in dis-cussions with like-minded institutions.


This event is about discovering new ideas and opportunities for clients in their sectors and organizations. The conference has limited sponsorship, so clients will actually get a chance to hear how market participants are dealing with changes and not be bombarded with sales pitches.

The networking opportunity at this particular event will be huge. Having been a 34-year participant in several capacities of many of our Repo & Securities Lending conferences, I do not discount the effi-cient opportunity for attendees to meet with dozens of their repo counterpar-ties and service providers in one location, sometimes even for 5-minute speed-dat-ing sessions, without having to travel all over the world.

There is no better location for all of those people to meet than at the confer-ence in New York City. Many of the other

annual conferences have deliberately moved out of NYC to try exotic locations to lure attendees. While an attractive change for some attendees, it is not the most effi-cient use of one’s time for a 1 ½ day-3 day conference.


The deleveraging of the entire market and disintermediation of broker/dealers has led to great opportunities for other pathways to market and liquidity. It has spawned furious work on CCPs, cleared tri-party, electronic trading platforms, Direct Repo or peer-to-peer financing, indemnified repo, As Agent financing, Direct Lending, special opportunity funds, the Fed’s RRP, and other structures. This has been the Big Bang in the financing markets.

Are there specific types of pro-fessionals who would benefit from a greater understanding of this market, and who should be sure to attend the conference?

I think all client sectors (money market funds, ETFs, seclending agents, banks, pension funds, GSEs, supranationals, municipalities, sovereign wealth funds, corporate treasurers, insurance compa-nies, endowments, credit unions, hedge funds, REITs and asset managers) can benefit from a greater understanding of the securities finance market. I also think that traders, salespeople, analysts, credit folks, risk management folks, legal folks, all the way up to CIOs, CFOs, Treasurers, and CEOs should feel free to attend. People making the decisions on how their firms get involved in securities lending and repo will see the biggest benefits.

eSecLending’s Peter Bassler and Simon LeeWhy has eSecLending decided to participate in the Finadium Investors in Securities Lending (FISL) conference?

Simon Lee: The regulatory landscape affecting the securities lending market-place has shifted significantly in recent years and continues to drive the evolu-tion of the business. In bringing together a wide cross-section of market partici-pants, we believe that the FISL Conference will provide a platform for an informed, transparent debate and a greater under-standing of the issues affecting the indus-try today.


Lee: A greater understanding of the issues affecting the marketplace leads to more informed decision making, enabling beneficial owners to effectively adapt to this evolving business.


Lee: Yes, there are a number of trade opportunities available to beneficial owners to enhance their securities lend-ing programmes, including lending in new markets, engaging in peer-to-peer (P2P) transactions and entering into more structured trades, such as term lending.


Peter Bassler: Securities lending touches many professionals within an asset manager or an organization that lends securities directly. The function that has the most to gain from this mar-ketplace is portfolio management. Under-standing the dynamics of the short side of the market and how that can be leveraged

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for investor benefit should be a priority for any portfolio manager.

Securities lending is a pure fund share-holder/beneficiary product. It is often mis-understood, and coming to this event will demystify and clarify how this product can benefit virtually any portfolio.

Programs can be tailored to accom-plish many different goals, and securities lending programs don’t need to be an all or nothing proposition. The product can also help facilitate long/short strategies and can be a cost effective form of lever-age as traditional leverage tools become more expensive.

In addition to portfolio managers, any other function that touches the product can benefit from this conference, whether they work in operations, fund administra-tion, legal or corporate governance. The product is unique in that it touches virtu-ally every function within an investment firm.

What Should Beneficial Owners be Focusing on in 2017?

Bassler: New market dynamics demand that beneficial owners take a fresh look at guidelines that may be outdated (i.e., types of counterparties, cash guidelines, non-cash collateral acceptability and breadth, etc.). Beneficial owners should also review whether the right people are involved with the lending program at their organi-zation. This product touches many depart-

ments, and it may be worth having work-ing groups that assess the firm’s participa-tion (i.e., tax, trading, legal, operations and accounting, etc.).

Beneficial owners should also assess how to increase revenue from their lend-ing program in a risk-controlled environ-ment and better understand how indem-nification is impacting their lending agents’ capital charges and single coun-terparty credit limits, as well as how they impact their lending program.

Citi’s Jeff BonaldiWhy has Citi decided to partici-pate in the Finadium Investors in Securities Lending (FISL) conference?

Citi has prided itself as one of the pre-mier providers of agency lending solu-tions. As a sponsor of the event, this pro-vides an opportunity for Citi to demon-strate to the industry the innovative and forward thinking nature of our securities lending business. Our ability to deliver solutions to meet our client’s changing market needs is at the core of our dynamic ‘program structure. In addition, by lever-aging Citi’s unmatched global presence in emerging and developed markets, Citi is able to lend in more markets than any other lending agent.


This conference provides the opportu-nity to engage with leading industry par-ticipants on the most important topics in the securities lending marketplace.


Yes, as the capital markets and regu-latory environment continues to evolve, these changes bring new opportunities to enhance and develop securities lending programs. From developments in tech-nology to changes in collateral accept-ance, there’s the ability to optimize the way to lend securities. This is exactly the approach that is core to Citi’s lending pro-gram. Through our innovative and analyt-ical approach to securities lending, we are able to extract more value for our clients from securities lending than our compet-itors can achieve.


It is important for all investors to have a good understanding of the current securi-ties lending market landscape. All invest-ment professionals can benefit from attending and enhancing their under-standing of securities lending.



SPEAKER PROFILESIrene Aldridge, Keynote Speaker

Irene Aldridge is an American/Canadian business-woman, quantitative Big Data researcher

and author. Aldridge is presently Presi-dent and Managing Director, Research, of AbleMarkets.com, a Big Data for Capi-tal Markets company. Previously, Aldridge designed and ran high-frequency trad-ing strategies in a $20-million cross-asset portfolio. Still previously, Aldridge was, in reverse order, a quant on a trading floor; in charge of risk quantification of com-mercial loans; Basel regulation team lead; technology equities researcher; lead sys-tems architect on large integration pro-jects, including web security and trading floor globalization. Aldridge started her career as software engineer in financial services. Aldridge holds a BE in Electrical Engineering from Cooper Union, and MS in Financial Engineering from Columbia University, and an MBA from INSEAD. In addition, Aldridge studied in two PhD pro-grams: Operations Research at Columbia University (ABD) and FInance (ABD).

Aldridge is the author of multiple aca-demic papers and several books. Most notable titles include “Real-Time Risk: What Investors Should Know About Fin-tech, High-Frequency Trading, Flash Crashes” (co-authored with Steve Kraw-ciw, Wiley, 2017), “High-Frequency Trad-ing: A Practical Guide to Algorithmic Strategies and Trading Systems” (2nd edi-tion, translated into Chinese, Wiley 2013), and “The Quant Investor’s Almanac 2011: A Road Map to Investing” (Wiley, 2010). Her recent academic publications include “ETFs, High-Frequency Trading and Flash Crashes” (Journal of Portfolio Manage-ment, 2016), and “High-Frequency Runs and Flash Crash Predictability” (Journal of Portfolio Management, 2014).

Nancy Allen, EquiLend

Nancy Allen is global product owner of DataLend, the secu-rities finance market data division of

EquiLend. Allen has more than 16 years of experience in the securities finance market across client types, geographies and roles. As global product owner, she has responsibility for the strategic devel-opment and growth of the DataLend prod-uct including the management of the product specialist team responsible for the client experience. Allen joined Data-Lend from Northern Trust, where most recently she was senior vice president and head of international fixed income secu-rities lending trading, based in London. Previously, Allen held various positions in securities finance at Northern Trust, State Street and Deutsche Bank. She has a Bachelor of Science degree in Business/Managerial Economics from Cornell Uni-versity in Ithaca, New York.

Peter Bassler, eSecLending

Managing Direc-t o r , B u s i n e s s Development.

Peter Bassler is a Managing Director at

eSecLending. In his current role, he is the Global Head of Business Development. Peter joined eSecLending in 2008 and has more than 22 years of industry experience. Prior to eSecLending, Peter was the Direc-tor of Institutional Marketing and Client Management at Dresdner Kleinwort Agency Securities Lending (now Deutsche Bank). Prior to this role, Peter was a Senior Vice President at Allianz Global Investors. Prior to Allianz, Peter was a Vice Presi-dent of Origination and Investor Market-ing within Global Markets at Deutsche Bank in New York. Peter began his career at Deutsche Bank as a commercial banker and credit analyst within the Financial Institutions Group. Throughout his career,

Peter has been instrumental in building successful, profitable franchises in bank-ing, asset management and capital mar-kets. Peter received his Bachelor of Arts from Dickinson College in Pennsylvania.

Brock Bell, Capstone Invest-ment Advisors

Vice President of Treasury and Portfo-lio Finance.

Brock Bell is cur-rently Vice President of Treasury and Portfolio Finance at Capstone Investment Advisors, a multi-asset volatility hedge fund. Mr. Bell joined Capstone in March 2016. Before joining Capstone, he worked for Morgan Stanley, Barclays, and J.P. Morgan in securities lending and equity finance sales and trading for over 9 years. Mr. Bell received a Bachelor’s Degree from Princeton University in 2006.

Chris Benedict, EquiLend

Chris Benedict is director of DataLend, the securities finance market data divi-sion of EquiLend. As

DataLend’s lead business analyst, project manager and quality assurance expert, he helped oversee the development and sub-sequent launch of the business in January 2013. Benedict previously was vice presi-dent of Product Development at EquiLend, and worked in various roles at Bearing-Point, Pershing Securities, Sherwood Secu-rities and Yamaichi International (Amer-ica). He has an MBA in Finance and MS in Information Systems from Boston Univer-sity and is a frequent contributor to vari-ous industry publications on a wide range of securities finance topics. He holds Series 7, 24 and 63 licenses.

Elaina Kim Benfield, VanguardSenior Counsel.Elaina recently joined Vanguard as

Senior Counsel to manage legal and regu-



latory matters affecting Vanguard’s global securities lending and repo trading busi-nesses. Prior to Vanguard, Elaina was Vice President, Senior Counsel at State Street Bank and Trust Company, where she launched, developed and managed the global expansion of its alternative prime brokerage business (enhanced custody). Prior to State Street, Elaina was an asso-ciate and counsel at the law firm Wilm-erHale, specializing in the Investment Company Act of 1940 and matters affecting the mutual fund industry. Elaina holds degrees from Boston College Law School and Georgetown University.

Jeff Bonaldi, CitiDirector, Head

of Agency Securi-ties Lending Sales, Americas.

Jeff is responsible and accountable for

business development in the Americas region for the Agency Securities Lending group at Citi. In this role, Jeff also works on the development and execution of Citi’s marketing and branding strategy for the agency securities lending product. Previously, Jeff served as a Senior Portfo-lio Manager on Citi’s U.S. Cash Collateral Reinvestment desk where he executed cash investment and trading strategies on behalf of Citi’s securities lending cli-ents. Prior to joining Citi, Jeff spent four years at Merrill Lynch Investment Manag-ers (MLIM). At MLIM, Jeff was as an Asso-ciate Portfolio Manager, where he helped manage the flagship Institutional Money Market and Enhanced Cash funds.

Jeff holds a B.A. in political science from The College of New Jersey. In addition to being a member of the Global Securities Finance Senior Management team, Jeff has completed Level II of the Chartered Financial Analyst (CFA) program and is a Series 7 and Series 63 license holder.

Doug Brown, CFA, State Street

Global Head of Alternative Financ-ing Solutions.

Doug Brown is the Global Head of Alter-

native Financing Solutions in State Street’s Securities Finance business. In this capac-ity, he is responsible for developing and growing the Liquidity & Leverage Solu-tions platform and Cash Cross product. Previously, he served as the Head of Busi-ness Development and Client Manage-ment for Agency Lending in North Amer-ica for Securities Finance. Mr. Brown is involved in the development of new stra-tegic initiatives at both the divisional and corporate level.

Prior to joining State Street, Mr. Brown spent over six years at Credit Suisse as a director in Prime Services, structuring securities lending and financing solu-tions for public funds, mutual funds, endowments/foundations, corpora-tions and hedge funds. Prior to his role at Credit Suisse, he held roles at State Street and Mellon Trust / The Boston Company as a relationship manager in Securities Finance.

Mr. Brown has a Bachelor of Arts in Economics from the University of Mich-igan. He holds the Chartered Finan-cial Analyst (CFA) designation and is a member of the Boston Security Analysts Society.

Michael J. Curran, BNY Mellon

Executive Vice P r e s i d e n t a n d Global Head of For-eign Exchange (FX)

Services.Michael Curran is an Executive Vice

President and heads Global Foreign Exchange Services, one of the businesses that comprise BNY Mellon Markets. The FX Services business provides our Invest-ment Services clients with access to the

global foreign exchange markets. Mike also has assumed leadership responsi-bility in the US for DBV-X, our US broker-dealer peer-to-peer collateral alternative trading platform to be launched later this year pending regulatory approval. In addition to serving as a member of the Markets Leadership Team, Mike is also a member of the company’s Operating Com-mittee. Mike is also on the boards of the Foreign Exchange Professionals Associ-ation (FXPA) and the FX Division of the Global Financial Markets Association (GFMA).

Mike joined BNY Mellon in 2012, from MF Global, whereas global co-head of the client management group he led the integration of client strategy and prod-uct value. Prior to that, he spent 19 years with UBS Investment Bank, where he was a managing director and member of the Board of Managers for UBS Securities, the firm’s U.S. broker dealer. His responsibili-ties included leadership roles focused on institutional sales & trading, funding and key client initiatives as part of UBS’s Fixed Income, Currencies & Commodities (FICC) division. Earlier in his career he spent five years with Citibank’s Investment Bank, underwriting, selling and issuing stable value investment products to US corpo-rate plan sponsors of defined contribu-tion plans.

Mike earned a BBA degree in Account-ing at Niagara University.

Lance Doherty, Pacific Life Insurance Company

D i r e c t o r o f Treasury.

Lance Doherty has been a Director at Pacific Life since 2006 and is responsible for short term invest-ing, financing and collateral management for all of Pacific Life’s entities. Prior to his current position, Mr. Doherty was Vice President of International and Domes-tic Lending at Wachovia Metropolitan West Global Securities Lending. Previous



SPEAKER PROFILES

to joining WMWGSL he was employed with Barclays Global Investors as associ-ate securities lending trader, equity port-folio manager and settlements specialist. He received a BS from California Polytech-nic State University as San Luis Obispo in Agricultural Business Management and an MBA from University of Southern California.

Brendan Eccles, Scotiabank

Managing Direc-tor, Global Co-Head of Securities Lending.

Brendan has been a member of the Scoti-

abank Prime Services team since 2004. He began his career at Scotia in Toronto as a trader on the Securities Lending desk. In 2006, he moved to New York to launch the US Securities Lending product. In 2013, he was promoted to North American Head of Securities Lending and in 2015 was pro-moted to Global Co-Head of Securities Lending. Prior to working at Scotiabank, Brendan worked at RBC Investor Services as a Securities Lending Trader from 2002 to 2004. He holds an Honours Bachelor of Science, Science & Business (Chemistry Option) from the University of Waterloo and is a CFA Charterholder.

Josh Galper, Finadium

Josh Galper is the lead for Finadium’s research and consult-ing practice with an expertise in institu-

tional investments, treasury and financ-ing. Josh has conducted numerous con-sulting assignments for banks, asset hold-ers, CCPs and technology companies, and is the author of over 60 industry reports as part of the Finadium research sub-scription. He also writes for Finadium’s online and hard copy magazine, Secu-rities Finance Monitor. Josh has been quoted in most industry publications cov-ering hedge funds, securities finance, col-lateral management and financial mar-

kets. He holds an MBA in Financial Engi-neering from the MIT Sloan School of Management.

Finadium is a research and consulting firm focused on securities finance and asset servicing. The firm conducts consult-ing assignments on institutional invest-ments, treasury and financing. Finadium’s consulting work is driven by its independ-ent research series, including primary surveys of plan sponsors, asset managers, prime brokers and other market partici-pants. Finadium’s training and event divi-sion holds our annual conference in New York as well as smaller events across the US, Europe and Asia. Our clients include pension, asset managers, broker-dealers, prime brokers, custodians, exchanges, CCPs, Central Securities Depositories, reg-ulators and technology companies.

For more information on Finadium, please visit us at www.finadium.com.

Joshua W. P. Gray, Russell Investments

Associate Director, Securities Lending & Proxy Governance.

B.S. Finance, Bryant College, 1997.

Joshua Gray is an Associate Director, Securities Lending & Proxy Governance, in the Operations, U.S. Services & Govern-ance division at Russell Investments based in Seattle. Joshua is responsible for Rus-sell Investment’s global securities lend-ing programs and is chair of the global securities lending working group. He is responsible for ensuring that Russell Investment’s securities lending programs are conducted in a globally consistent manner. He works within Russell Invest-ment’s global securities lending working group to help maintain and document processes for all aspects of the securities lending program. Joshua is also respon-sible for the global governance of Russell Investment’s proxy voting and class action programs. Joshua joined Russell in 2010.

Keith Haberlin, Brown Brothers Harriman

Head of Global Securities Lending.

Keith Haberlin joined BBH in 2004

and is currently the Head of the Global Securities Lending group in Investor Ser-vices. In 2013, Keith relocated from London to the US to manage our global Securities Lending business. Prior to this role, Keith was Head of Infomediary EMEA.

Keith has more than 25 years of expe-rience in the securities services industry, spanning operations, client service, rela-tionship management and sales. He holds accreditations from the International Capital Markets Association and the Char-tered Institute of Bankers. Keith has rep-resented BBH on the SWIFT US National Group, the Omgeo Bank Steering Commit-tee and the International Securities Lend-ing Association (ISLA) Board.

Patricia Hostin, BlackRock Managing Director.

Patricia Hostin, Managing Director, is Head of US Equity trading and the

regional Head of Global Equity trading for BlackRock’s Securities Lending team.

Ms. Hostin’s service with the firm dates back to 2003, including her years with Bar-clays Global Investors (BGI), which merged with BlackRock in 2009. At BGI, she was a strategist in the Product Strategy group, where she was responsible for securities lending, cash research and the develop-ment and vetting of new strategic initi-atives and alternative business models. Prior to this role, she was a trader in BGI’s Securities Lending team.

Ms. Hostin earned a BA degree in Eco-nomics from the University of California at Berkeley.



Julie Hubbard, Brown Brothers Harriman

Head of Securities Lending Relationship Management and Sales – Americas.

Julie Hubbard currently serves as a Senior Vice President responsible for the relationship management and sales teams supporting the Americas based clients and prospects. She joined BBH in 2007 as a Senior Relationship Manager. Ms. Hub-bard has more than twenty years of expe-rience in the financial services industry.

Prior to joining BBH, Ms. Hubbard spent 13 years at IBT where she served in a variety of capacities, most notably as Director in Client Management responsi-ble for IBT’s largest alternative investment clients. Ms. Hubbard has also held vari-ous managerial positions in global cus-tody, fund accounting, and mutual fund administration. Prior to joining IBT, Ms. Hubbard worked for Mellon Trust (for-merly, The Boston Company) in Global Custody Services and the Analytical Ser-vices Group.

Ms. Hubbard is a cum laude graduate of Boston College with a Bachelor of Arts in Political Science.

Christopher Jaynes, CFA, eSecLending

Chris Jaynes is President and head of client relationship management and

business development at eSecLending. He is responsible for overseeing all client programs and setting strategy for the com-pany’s client growth. Chris was one of the original founders of the company and has more than 22 years of experience in finan-cial services. Before eSecLending, he held positions at UAM Global Securities Lend-ing, UAM Trust Company and State Street Bank. Chris is a CFA charter holder and received his Bachelor of Science from the University of Vermont.

Michael Kelleher, J.P. MorganAmericas Head of Equity Finance.Michael Kelleher is the Americas head

of equity finance at J.P. Morgan. Michael has been with J.P. Morgan since 2010, when he joined as Americas head of securities lending. Prior to that, Michael was the U.S. head of securities lending at UBS. He has a BA in economics from New York Uni-versity and a JD from St. John’s University School of Law.

William P. Kelly, BNY Mellon

Managing Director, Global Head of Agency Securities Finance.

Bill directs the agency securities

finance business for BNY Mellon Markets. Bill’s experience in the securities industry spans over 20 years. He joined BNY Mellon in 2002 after 13 years with Deutsche Bank (Bankers Trust). His responsibilities at Deutsche Bank were managing the global sales and client management activities of the Global Portfolio Management Group, which was responsible for both securi-ties lending and short term money man-agement products. Prior to these assign-ments, Bill was responsible for the Insur-ance Industry Custody Group at Bank-ers Trust where he had sales, client man-agement, operations and administration reporting to him.

Bill is active in the Risk Management Association (RMA), and he is a frequent speaker and panel participant at securities finance industry conferences. Bill holds a B.S. degree from Eastern Connecticut State College.

Jeffrey Kidwell Director, AVM, L.P.

Head of Direct Repo™.

Mr. Kidwell joined AVM in 2008 as a

Director of AVM Solutions and to spear-head Direct Repo™. He has been a senior and well-known architect of the Repo and

Securities Lending industry since 1982. Prior to joining AVM, he was the Head of the North American Repo Division (Trad-ing and Sales) and Executive Director for Morgan Stanley, where he worked from 1982-2004, and built the business into one of the top Repo Desks on the Street. He then became the Co-Head of the Global Repo Division (Trading and Sales) and Managing Director for Cantor Fitzgerald from 2004-2008, where he helped build it into a successful, brand-new Primary Dealer of the Federal Reserve. Since 2008, he has been the Head of Direct Repo™ and Director of AVM Solutions here at AVM. He has also run a Repo School for several clients at AVM and Cantor Fitzgerald, and has been an instructor in the Repo Schools at BMA, SIFMA, and SIA. He has been on several taskforces for the Federal Reserve and SIA and a member of the Financing Executive Committee of SIFMA. He has been a frequent conference speaker/mod-erator, contributor, and industry expert on Repo and Securities Lending topics for the GIOA, GFOA, IMN, FMS, RMA, BMA, SIFMA, Fabozzi, MMExpo, Wall Street Journal, Securities Lending Times, ISF Magazine, Sec Fin Monitor, and Bloomberg. He is the author of a daily Repo Commentary that has been distributed for the past 32 years to over 2900 people in the Repo industry, including most of the State Treasurers, the Federal Reserve, the ECB, and most cor-porate CFOs. He is a Registered General Securities Representative and a Registered Supervisory Principal with FINRA. When not speaking about repo, trading repo, or meeting with clients, Jeff also sings the National Anthem for Major League Base-ball games (since 2003) and performs fre-quently as an Elvis Presley tribute artist (since 1989).

William Mascaro, Citi

Director, Head of International Equity Trading.

Bill is the head of Agency Securities

Lending’s International Equities desk in



SPEAKER PROFILES

New York, and oversees Strategic Trading in North America. In his current position, he manages the securities lending of the firm’s custody and third-party client assets to global Banks & Prime Brokers, and pro-motes global coordination and strat-egy across Agency Securities Lending’s regional trading desks. Bill joined Citi as an analyst in Transaction Services in 2004 and rotated through the firm’s Treasury and Trade Solutions and Markets and Securities Services divisions.

Bill graduated from Cornell Univer-sity in 2004, with a B.S. in industrial and labor relations, and concentration in economics.

Michael McAu-ley, BNY Mellon

Global Head of Product Strategy.

Mike McAuley is Managing Director and Global Head of

Product Strategy for BNY Mellon’s Secu-rities Finance business. He is responsible for leading the business’ efforts to iden-tify and capitalize on new opportunities in a changing business, tax and regulatory environment. Prior to BNY Mellon, Mike was a Senior Managing Director for Pre-mier Global Securities Lending, a start-up company founded to develop a new third-party lending model. Prior to Pre-mier, he was a Senior Managing Director and the Chief Product Officer for securi-ties finance at State Street Bank and Trust Company. In this role Mike was responsi-ble for the global expansion of the agency and principal securities finance busi-nesses through new product develop-ment, merger and acquisition, and prod-uct innovation. Prior to holding this posi-tion, he was the Senior Managing Coun-sel responsible for all legal matters with respect to the securities finance business of State Street. Prior to State Street, he held positions as a Senior Managing Coun-sel for the master trust and global cus-tody business of Boston Safe Deposit and Trust Company and as an ERISA attorney for the Boston law firm of Gaston & Snow.

Mike is a former Chairman and currently Chair Ex-Officio of the Securities Lend-ing Committee of the Risk Management Association. He is also a former member of the Board of Directors of the Risk Man-agement Association. Mike holds a BA in economics from Boston College and a Juris Doctorate from Suffolk University Law School.

Marney McCabe, Brown Brothers Harriman

Head of US Securi-ties Lending Relation-ship Management.

Marney McCabe joined BBH in July 2006. She is the Head of Securities Lending Relationship Man-agement for the Americas. During her 10 years at BBH, Marney has been respon-sible for overseeing the intrinsic value lending programs for many of the Firm’s strategic asset manager clients. She is a member of the Boston Women’s Network Leadership Committee.

Prior to joining BBH, Marney was a Portfolio Manager at Emerson Invest-ment Management in Boston, where she provided investment and wealth manage-ment services to a wide range of institu-tional and individual clients. Marney also spent seven years in San Francisco where she worked as an Equity Research Asso-ciate at Soundview Technology and an International Paper Trader for the Cell-Mark Group.

Marney has over 18 years of experience in the financial services industry and is a graduate of Hobart and William Smith Colleges.

John McGuire, CFA, State Street

Global Head of Enhanced Custody.

John McGuire is the Global Head of Enhanced Custody

in State Street’s Securities Finance divi-sion. In this capacity, he oversees busi-ness development, client management,

and trading and is responsible for driv-ing growth in this key business for State Street. Mr. McGuire helped launch the Enhanced Custody product in 2008 and was responsible for business develop-ment since the product’s inception. He has helped drive double digit growth year over year for Enhanced Custody and maintains a strong network of industry contacts.

Prior to Enhanced Custody, Mr. McGuire held a variety of positions at State Street where he began his career in 1996. He has held roles within Global Ser-vices, Global Treasury and Global Markets.

Mr. McGuire has a Bachelor of Arts in History from Lehigh University, a Master of Business Administration (MBA), and a Master of Science in Investment Man-agement (MSIM) from Boston University. He holds the Chartered Financial Analyst (CFA) designation and is a member of the Boston Security Analysts Society.

John McIntyre, PGIM

Managing Director and Head of the Secu-rities Lending Unit.

John McIntyre is a Managing Direc-

tor and Head of the Securities Lending Unit for PGIM Fixed Income. Mr. McIn-tyre leads the group responsible for secu-rities lending activities for PGIM, Inc. and for portfolio financing activities of PGIM Fixed Income’s managed long/short strat-egies. Prior to his current role, Mr. McI-ntyre managed Prudential Securities’ Agency Lending business, which was established in 1999 to facilitate securities lending for the Firm’s retail and annuity mutual funds, and has since merged into PGIM Fixed Income’s securities lending program. Previously, he held a number of management positions in the Firm’s Treasurer’s Department, including head of the Firm’s securities lending activi-ties, and head of the Firm’s direct-issue commercial paper program. Mr. McIn-tyre joined the Firm in 1984. He received a BA from Providence College and an MBA from New York University’s Stern School



of Business.

Rich Mejzak, CFA, BlackRock

Managing DirectorRich Mejzak, CFA,

Managing Director, is Head of US Portfo-lio Management for

BlackRock’s Cash Management team. He is primarily responsible for US and Cana-dian liquidity and short duration portfo-lios, including securities lending collat-eral, mutual funds, separate accounts, and ETFs.

Mr. Mejzak’s service with the firm dates back to 1990, including his years with Mer-rill Lynch Investment Managers (MLIM), which merged with BlackRock in 2006.

Mr. Mejzak is a member of the CFA Institute and the CFA Society of Philadel-phia. He earned a BS degree in accounting from Villanova University and serves on the Villanova School of Business Finance Department Advisory Council.

Karl Mocharko, Federated Investors

Karl Mocharko is the head repo trader for Federated Inves-tors, with 22 years’

experience in the industry. I currently manage all repo positions, for our 40 act funds, UCITS funds, state pools, and pri-vate funds. I also, co-manage Federated’s securities lending program. We utilize a 3rd party lending agent, but manage cash collateral reinvestment in house. Indus-try initiatives include, the tri-party repo task force, SIFMA/AMG repo participant, and Pittsburgh Society of Investment Professionals.

Patrick Morris-sey, Vanguard Head of Trading, Securities Lending.

Patrick Morrissey is the Head of Trad-ing for the Vanguard Securities Lending program. As Head of Trading, Mr. Morris-sey has both management responsibilities as well as responsibilities for global trad-ing strategies within securities lending.

Mr. Morrissey joined The Vanguard Group in 2005 as a Securities Lending Trader. Prior to joining The Vanguard Group, Mr. Morrissey served as an ana-lyst at The Bank of New York in the Cor-porate Actions, FX, Derivatives, Institu-tional Marketing, and Global Settlements teams before trading on the international equities desk for the American Depositary Receipt division.

Mr. Morrissey received a Bachelor’s degree in Finance from Saint Joseph’s Uni-versity and a Master’s Degree in Financial Engineering from Temple University.

Sam Pierson, IHS Markit

Director of Securi-ties Finance.

S a m P i e r s o n , Director of Securities Finance at IHS Markit.

Sam has over nine years of experience in the financial services industry, of which he has focused five years on the securi-ties lending industry. He was a member of the Data Explorers team in NYC, which joined IHS Markit through acquisition in 2012. His previous experience includes risk operations at Partner Fund Management and analyst at Q Capital Management. Sam holds a B.A. in Economics from the University of Colorado.

Christopher K. Poikonen, eSecLending

Executive Vice President, Business Development.

C h r i s t o p h e r Poikonen is executive vice president, busi-ness development at eSecLending. He is responsible for identifying and evaluating new growth opportunities across markets, and for the business development and

relationship management of the compa-ny’s central clearing house, exchange and insurance relationships in the U.S., Ber-muda and Europe. Christopher joined eSecLending in 2001 and has more than 22 years of financial services experience. Christopher received his Bachelor of Sci-ence from the University of Massachu-setts-Dartmouth and his Master of Busi-ness Administration from Boston College.

Thomas Poppey, Brown Brothers Harriman

Global Securities Lending Head of Pro-gram Management.

Tom Poppey joined BBH in 2008 and is the Head of Program Management for Global Securities Lend-ing. In this capacity, he is responsible for product development, middle office man-agement, and regulatory oversight.

Prior to joining BBH, Mr. Poppey was employed by State Street Corporation for 15 years, most recently within their Secu-rities Finance business as a Managing Director. Mr. Poppey received his Bache-lor of Arts in Accounting from Bridgewa-ter State College and Masters of Business Administration degree from Boston Col-lege. He has also been awarded the Char-tered Financial Analyst and Financial Risk Manager designations and is a member of the CFA Institute, the Boston Securities Analyst Society, and the Global Associa-tion of Risk Professionals.

David Riehl, IHS Markit

Director of Securi-ties Finance.

David Riehl, Direc-tor of Securities Finance at IHS Markit.

David joined Data Explorers in 2009 prior to its acquisition by IHS Markit in 2012. He oversees a team of product specialists and quantitative researchers providing buy side firms with research and analytics to optimize their portfolio finance opera-tions and to generate alpha. He has been a



SPEAKER PROFILES

speaker at the FactSet Investment Process Symposium, the IMN and his research has been featured in The Economist and on CNBC.

Dennis E. Riley, Goldman SachsCo-Head of U.S. Relationship

Management. Dennis is Co-head of Client Service and

Relationship Management. He has spent more than twenty two years in the finan-cial services industry, including twenty years with Goldman Sachs. Prior to the GSAL Client Service and Relationship Management role, Dennis was the Global Head of Operations and Risk Management for GSAL. Dennis graduated from the Uni-versity of Massachusetts at Amherst with a B.A. in Political Science.

William Smith, J.P. Morgan

Managing Director, Americas Sales Execu-tive - Securities Lend-ing, J.P Morgan.

Mr. Smith is responsible for managing sales and new business development for J.P. Morgan’s global securities lending business. In this capacity, he directs the overall sales strat-egy for both custodial and non-custodial securities lending, focusing on position-ing the business for growth by delivering innovative, market-leading products, ser-vices and client-facing technology to pro-spective and existing J.P. Morgan clients.

Mr. Smith joined J.P. Morgan in 2007, bringing more than 25 years of busi-ness management experience in securi-ties lending, collateral and cash manage-ment and capital markets. Prior to joining J.P. Morgan, he held several key positions in the securities lending industry, includ-ing managing director at HSBC Bank USA NA, responsible for the global securities lending business; global business head for securities lending at Bankers Trust; and, subsequently, Deutsche Bank, AG.

Mr. Smith received his BS in econom-ics from The State University of New York, and his MBA from the Stern School of

Business at New York University.

Sam Sparhawk, IV, BNY Mellon

Managing Direc-tor, Sales & Relation-ship Management.

Sam is a member of the BNY Mellon

Markets sales and relationship man-agement team, and his responsibilities include business development and client relationship management for the insur-ance, government and not-for-profit sec-tors. Prior to joining BNY Mellon in 2010 with the acquisition of PNC Global Invest-ment Servicing, he spent 25 years with The PNC Financial Services Group in various management positions including cor-porate trust, global custody, and securi-ties lending. Sam received a Bachelor of Arts degree from the University of Ver-mont. He is a member of the Investment Company Institute, the Securities Lend-ing Division of the RMA, and the Amer-ican Bankers Association, and holds the Certified Securities Operations Profes-sional designation from the Institute of Certified Bankers.

Francesco M. Squillacioti, State Street

Global Head of Agency Lending.

Fra n c e s c o M . (Cesco) Squillacioti

is the Global Head of Agency Lending in State Street’s Securities Finance busi-ness. In this capacity, he oversees busi-ness development, client management, and trading for this core business at State Street. Previous to this role, Mr. Squillaci-oti was President & Representative Direc-tor of State Street Global Markets (Japan), and Representative of State Street Bank and Trust Company Tokyo Branch.

Mr. Squillacioti has been a part of the Securities Finance organization since 2000, serving as the Asia-Pacific regional busi-ness director and overseeing business strategy and client relationships in the

region. Since joining State Street in 1990, he has served in a number of key capac-ities, including acting as an Assistant to the President, working in the company’s Global Strategy and Development division and heading its Strategic Planning group in Japan.

Mr. Squillacioti holds a Bachelor of Arts in Economics from Tufts University.

Craig Starble, eSecLending

Chief Executive Officer.

Craig Starble joined eSecLending in 2013 as Chief Exec-

utive Officer. Prior to joining eSecLend-ing, Craig was the Founder and CEO of Premier Global Securities Lending, LLC (PGSL), where he was responsible for designing and launching a new securities lending operation. Before that, he served as Executive Vice President and Head of State Street Bank’s global securities lend-ing division, responsible for directing a vertically organized global division of 450 individuals comprised of trading, client service, product development, sales, oper-ations, technology, credit/risk and asset/liability management professionals. Craig was also a Co-Founder and CFO for Shoe-buy.com, and Managing Director for the Treasury Funding Group at BankBoston Corporation. Craig received a Bachelor of Arts in Economics and Government from Connecticut College.

Aaron Stearns, AVM L.P.

Aaron Stearns, CFA is a Director and Co-Head of Financ-ing of AVM Solutions at AVM, LP. He joined

the firm in 2007. Previously he worked on the Dollar Funding desk at Abbey National Securities and the Government Trading desk at UBS. Mr. Stearns earned an MBA with a concentration in global finance from the Thunderbird School of Global Management (2007) and graduated



magna cum laude with a BS in finance from the University of Connecticut (2000). Mr. Stearns is a CFA Charterholder and a General Securities Representative regis-tered with FINRA.

John Strac-quadanio, ScotiaBank

Managing Direc-tor, Head of Prime Services and Collat-eral Management and

Funding. John has 25 years of financial services

experience and is currently working for Scotiabank in New York. He joined Scoti-abank in 2010 as Co-head of Global Prime Services to build out the US Global Prime Brokerage offering. Prior to that John was with Barclays Capital, where he held senior roles within Prime Services, includ-ing Head of US Prime Brokerage and Global Head of Electronic Equity Execu-tion and at Morgan Stanley within their Equity Finance group. John received his undergraduate degree in Computer Sci-ence and Statistics from Baruch College.

Jason Strofs, CFA, BlackRock

Managing Director.Jason Strofs, CFA,

Managing Director, is Global Head of Prod-uct Strategy for Black-

Rock’s Securities Lending team.Mr. Strofs’ service with the firm dates

back to 2000, including his years with Barclays Global Investors (BGI), which merged with BlackRock in 2009. At BGI, he was director of Investment Strategy for the Global Securities Lending busi-ness. Prior to this role, he was a portfolio manager and strategist in the firm’s Struc-tured Solutions Group as well as Head of Channel strategy for the indexing, tran-sition, securities lending, and allocations businesses at BGI. Prior to joining BGI, he was an asset/liability manager in the secu-rities lending business of State Street Bank and Trust Co.

Mr. Strofs is a member and prior chair of the Risk Management Association’s (RMA) Securities Lending Executive Com-mittee. He earned a BA degree in econom-ics from the University of California at Irvine and a MA degree in international economics and finance from Brandeis University.

Robert Swan, Keynote Speaker

Robert Swan is a polar explorer, envi-ronmentalist and the first man ever to walk unsupported to

both the North and South Poles. He is an exceptionally gifted communicator and is regarded as one of the world’s top motiva-tional speakers.

He was awarded the OBE in 1995. In 2003 and 2004, Robert and his company, 2041, delivered the first ever corporate Antarctic Expeditions on teamwork and leadership and this year he led the 14th Expedition to the great continent. Through positive par-ticipation and real missions, the unique insights and lessons he has learned, have enabled Robert Swan to educate and stim-ulate his audiences. He compares his icy experiences to boardroom maneuvers and his inspirational addresses have received the acclaim of discerning audiences worldwide.

His contribution to education and the environment have been recognized through his appointment as UN Goodwill Ambassador for Youth, a Visiting Profes-sorship of the School of Environment at Leeds University and in 1994 he became Special Envoy to the Director General of UNESCO.

Matthew Thomas, BlackRock

Managing Director.Matthew Thomas,

Managing Director, is Global Head of Black-

Rock’s Prime Brokerage and Financing group. The Prime Brokerage and Financ-

ing team provides a centralized and com-prehensive approach to managing Black-Rock’s prime brokerage and financ-ing relationships. The group’s activities include counterparty selection and over-sight, financing cost management, margin efficiency, negotiation of business terms within financing documentation, and counterparty exposure monitoring. Mr. Thomas previously focused on manag-ing the firm’s equity prime brokerage and financing activities.

Mr. Thomas’ service with the firm dates back to 2010. Prior to joining BlackRock’s Prime Brokerage and Financing group, Mr. Thomas spent over six years at AQR Capital Management in the Global Stock Selection Group. At AQR, Mr. Thomas was a Portfolio Manager responsible for sev-eral Global Equity strategies in addition to overseeing portfolio financing activities. Mr. Thomas began his career at DKR Cap-ital where he managed the firm’s Opera-tions Group.

Mr. Thomas earned a BS degree in Finance from Bentley University.

Mark A. Whipple, Goldman Sachs Global Co-Head. Goldman Sachs Agency

Lending.Mark co-heads Goldman Sachs Agency

Lending (GSAL), the agency securities lending business within Prime Services. He joined Goldman Sachs in 1999 and spent the first nine years in the U.S. group based in Boston. In 2008, Mark relocated to London where he oversaw sales and trad-ing responsibilities for GSAL’s Non-US business. After eight years in London, Mark returned to Boston in 2016 where he assumed his current responsibilities as Co-Head of GSAL’s global agency platform.

Mark is currently a member of the Risk Management Association’s (RMA) Execu-tive Committee on Securities Lending. He has also served on the Regulatory and New Markets sub-committees for the Inter-national Securities Lending Association (ISLA) during his time in London.

Mark received his B.S. in Finance and Marketing from Boston College, Carroll School of Management.



SPEAKER PROFILES

Paul Wilson, J.P. Morgan

Managing Director, Global Head of Agent Lending Product and Portfolio Advisory.

Paul Wilson is the global head of agent lending product and portfolio advisory, where he has respon-sibility for management and develop-ment for the securities lending product, defining and managing the business and product strategy, driving and deliver-ing the product development process to improve client satisfaction, reduce risk and improve operating leverage. Portfo-lio advisory helps clients review and opti-mise the earnings and revenue poten-tial from securities lending given their unique parameters; articulates how reve-nue has been generated, providing clients with benchmarking analysis data that demonstrates J.P. Morgan’s performance and articulate how market and macroe-conomic influences impact the securities lending business and performance.

Paul has been with J.P. Morgan for 32 years. During this time he has held a vari-ety of different positions within Inves-tor Services including operations, sales, client management, client service, product development and product management, across a broad range of products includ-ing collateral management, futures and options clearing, securities clearance, for-eign exchange and cash management.

Robert Zekraus, Scotiabank

Director, Head of Client Capital Management.

R o b e r t ( B o b ) Zekraus is Director,

Scotiabank Global Banking and Markets. He is responsible for Client Capital Man-agement across Prime Services and Col-lateral Management & Funding. This mandate focuses on the strategic deploy-ment and management of scarce financial resources across both businesses. In addi-tion Bob works on developing customer-

focused financing solutions that align with Prime Services and Collateral Man-agement & Funding risk appetite, liquid-ity, capital and balance sheet strategies.

Bob is a member of the Prime Services global management team and new busi-ness committee. He chairs Prime Services weekly funding and liquidity manage-ment forum and also sits on the bank’s US asset and liability committee (US ALCO).

Prior to joining Scotiabank, Bob was Director, Prime Services, at Barclays where he was a member of the Global Equity Finance management team. He held var-ious senior leadership roles in equity financing and prime brokerage as head of US securities lending, funding and financ-ing sales. He was part of the original team that established the Collateralized Finance Group at Barclays. Bob started his career at Daiwa Securities Inc. in Prime Brokerage.

Bob received a B.S. degree in econom-ics and business management from Cort-land College.

Documents

XXXXXXXXXXX - finadium.com · TE NOWLEDE XXXXXXXXXXX finadium.comsecuritiesfinancemonitor/ Barclays operations restructuring addresses a little-recognized ring-fencing risk In February