Monday, February 1, 2021
Gamestop and the Storming of the Hedge Funds' Bastille
Feb 1, 2021: The social controversy over Gamestop’s (GME) battle of wills — r/wallstreetbets v 'The Shorts' — will harden the scrutiny of regulators and litigators toward the US$2.4 trillion global ecosystem that supports hedge fund strategies. This is a pivotal moment, not only for GME and The Shorts, but also for the Bastille-walled clearing markets that their lenders and agents use to secure the funds' trade settlements and financings.
Tuesday, December 1, 2020
Supply Chains in Securities Finance to be Clarified and Stabilized
Shadow banking is history, say banking leaders, a thing of the past. New compliance and risk management systems based on the Securities Finance Transaction Regulation (SFTR) and the industry’s evolving Common Domain Model (CDM) will enable financial service providers to regulate their clients' exposure to counterparties with far more specificity than ever before possible. Originally accepted as a regulatory imposition, bankers are now viewing the SFTR reports of their loan principals as a platform to help state pension funds and others meet their ESG and tax compliance goals with unprecedented precision — along with proof of funding.
Tuesday, October 20, 2020
Compliance without Knowing the Borrower's Purpose - Is it Possible?
Sustainable investing is becoming more important to investors when creating portfolios. As a result, institutions often follow policies with formal environmental, social, and governance (ESG) factors to guide their investments. They commit substantial resources to ESG research and produce comprehensive reports about their compliance. But then the same institutions give away their proxy votes when they lend securities for fees to cover their bank charges. And the loans of those securities – and their proxies – go to borrowers with unknown intentions, and often with unknown identities.
Wednesday, September 30, 2020
Findings Point to a New Role for Emerging Fintech
European commissioners are reviewing a study from their securities and market authority (ESMA) that includes a recommendation for new laws to combat unfair trading practices and an extended remit for National Competent Authorities (NCAs) to conduct snap audits of securities loans and transactors. Loans deemed to be suspicious would prompt an inquiry to determine penalties for unfair strategies and inappropriate beneficiaries. However, useful audit results may be doubtful based on our preliminary review that uncovered shortcomings in the proposed SFTR surveillance datasets, as well as possible flaws in the study’s basic methodology.
Wednesday, December 4, 2019
Distributed Ledger Technology in Service to Activist Investors
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.