TradeTalks: Securities Finance Data & Trends

Do asset managers use securities finance data to make investment decisions? Find out with Sam Pierson, Director of Securities Finance at IHS Markit as he joins Jill Malandrino at the Nasdaq MarketSite.

Welcome to a snowy edition of trade talks from your host jill malandrino global markets reporter at nasdaq we bring the show to you live rain sleet or snow joining me this afternoon at markets is anne pearson he’s the director of securities finance / ihs market sam thank you very much for joining us apparently you make it happen in the snow – yeah so must go on

I mean let’s talk about what is securities finance data so securities finance data is global securities lending the corporate bonds government bonds equities ad ars etfs and inventory and loans for those securities so the inventory is currently a little over 20 trillion and the loans are about 2.5 trillion so who uses this kind of data and what would you use it

For so across the board and large global financial institutions so you have global custodians broker dealers hedge funds other large asset managers and they’re using it to benchmark their securities lending performance so for asset owners that means comparing yourself against your peers for borrowers of securities be they prime brokers or hedge funds that means

Comparing your rates to make sure you’re getting the best available borrows and then these another salient point for us at ihs market is that the borrows comprise basically a daily short interest metric so what trends have emerged in this kind of data recently so one thing that’s interesting after last year where retail was really painted with a broad negative

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Brush and there was some severe underperformance we’ve started to see some covering and so it’s a profitable trade that may be reaching its end then the u.s. mall reits both the equities themselves and the related bonds the balanced short balances have come off significantly this year and in europe our retails the most covered sector that we’ve seen so far this

Year so this kind of data can also help you make a more broad macro investment decision as well as what it sounds like yeah definitely so you can aggregate it up and look at sectors or countries and see how short balances are changing and get a view on investor sentiment so it’s a quant factor that they’ll use and then also on an it going all the way down to an

Individual security level to get a view on whether hedge funds are thinking you know short this security or asset class so securities lending is that only for equities no so there’s also corporate bond government bonds we’ve seen recently the high-yield related etfs and underlying corporate bonds having an increase in demand and being basically at the peak that

They’ve been post-crisis all right so is there anything else that we should know because blockchain kind of always finds its way into these conversations what are you learning about the data as it relates to blockchain absolutely so last year there was a lot of that speculative kind of froth towards the end of the year a lot of short sellers came in similar to the

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Pot stocks were way off of the highs no pun intended but and we’re you know so there’s kind of starting to be a differentiation of results you have some of the payment related stocks like square doing really well you have some of the pure kind of more speculative angles like riot blockchain or long blockchain that have done poorly the short interest across the

Board has remained relatively high and you have something like overstock that’s kind of in limbo but again the short sellers are having remained present and if you wanna go back to it one more time for the audience to understand i just want you explain again the different ways that this data can be used and how let’s say asset managers for example use this for

Their investment decisions yeah so you can see basically what people are doing in terms of buying and selling securities so the inventory we have reflects the securities that are being put into lending programs by the large asset managers and then the borrows against that reflect the short sales so it’s a good words i look of how institutional trading is perhaps

Thinking exactly yeah it’s a long short metric that you can look at globally across asset classes okay all right well thank you very much for joining us all circuits thank you traders thank you for joining me i’m jill malandrino global markets reporter at nasdaq

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TradeTalks: Securities Finance Data & Trends By Nasdaq