Wednesday, December 4, 2019

ESG-compliant Solutions to Stock Lending Bans

Distributed Ledger Technology in Service to Activist Investors

Author: Ed Blount

Stock lending agents and prime brokers were challenged with a once-in-a-career opportunity after the December 3rd, 2019 announcement that Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund, had decided to ban the lending of their offshore stocks -- nearly half of their holdings. That bold decision by the fund's CIO will reportedly cost as much as $300 million in lost annual income and “could prove hugely disruptive to equity markets if others follow its lead,” according to the Financial Times.

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Monday, May 13, 2019

Distributed Ledger Technologies in Securities Finance

As Revolutionary as Central Securities Depositories?

Author: Ed Blount

The most powerful Distributed Ledger Technologies (DLT) for securities finance will be cloud-based data lakes in which blockchains and shared ledgers form the currents and eddies. Smart contracts will power the mills that channel the data flows to provide services to their participants. In their potential, DLTs can reengineer current securities processes in the same way that central securities depositories (CSD) did in the 1970s … so long as the looming limitations can be overcome.

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Thursday, January 10, 2019

Taking Stock of Blockchain for Improving Securities Services

Initial hype has ebbed and real progress is being made

Author: Ed Blount

The early torrent of media hyperbole about distributed ledger technologies (DLT), such as blockchain and shared ledgers, has now been supplanted by reflection on lessons learned. Scaling concerns were allayed to some degree by DTCC’s November 2018 report that its study of throughput capacity for DLT was sufficient to handle massive U.S. equity trading volumes. More positive ink came as a group of 15 global banks reportedly eased ahead from initial testing to a planned 2Q19 start date for adopting the newly re-coded $11 trillion Trade Information Warehouse at DTCC, in which IBM created a shared ledger for tracking the lifecycle events of 98% of all credit default swaps.

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Monday, April 24, 2017

No Regulatory Relief for Securities Finance

Financial CHOICE Act leaves constraints intact

Author: Ed Blount
The latest legislative offering in the U.S., the Financial CHOICE Act, does nothing for securities finance. Nothing in the bill provides an exemption to the funding markets from the crushing weight of regulatory reform. At present, both political parties in the US seem willing to accept an outcome where the global funding markets are road kill from the reform steamroller. Many experts believe this legislative failure is due to analytic omissions on the regulators’ part. In that scenario, regulatory analysts simply don’t understand the global funding mechanism. Therefore, it is thought that regulators have not advised the legislators to offer relief, notwithstanding a steady chorus of complaints from securities lenders and borrowers. However, there is no omission. The regulators are fully aware of the effect of the impact of their rules. They simply choose to leave the new rules intact. 
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Wednesday, April 12, 2017

All the Bonds in Christendom

Part I: The Relationship Factor

Author: David Schwartz

The 180th anniversary of J.P. Morgan’s birth will fall on Monday, April 17th, 2017. The great financier died aged 76, a few months after testifying before the U.S. Congress in the Money Trust hearings. By all accounts, Morgan shocked the national media when he said that a strong relationship was more important than collateral when extending bank credit. Risk management, to Morgan, was personal, concise and pithy:

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