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Friday, 14th August 2020
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Securities lending operation launched in Ireland Back  
Securities lending is an activity whereby a security is transferred from a lender to a borrower on a temporary basis and eventually returned.

Lenders generally are insurance companies, pension funds, mutual funds and similar financial institutions, which hold pools of securities.

Borrowers tend to be investment banks who need securities for settlement and trading purposes. A lender receives collateral from a borrower at a level above the market value of the security on loan to cover market fluctuations, usually 105 per cent.

This is the first operation of its kind in Ireland and is likely to give a boost to the liquidity of the Irish Stock Exchange.

According to Beckmann: ‘Securities lending transactions are typically done on an open basis, which means a borrower and lender have the right to terminate a securities loan at any time. This feature is an important aspect of securities lending, since it allows the portfolio manager to sell securities in line with normal market practice even though a security may be on loan’.

The company is a specialist securities lending services provider and according to Beckman its launch will ‘facilitate the growth of the long awaited securities lending industry in Ireland.’ He added ‘We are at the beginning of a cycle of development of a professional liquid Irish securities lending market. This development can only be driven by innovative firms and will maintain and enhance the reputation of the Irish capital markets in Europe. It is not a question of whether but when market professionals will participate in a business that will bring the much needed liquidity, volume and more efficiency to the Irish market.’

Commenting on the launch John Prosser, chairman of Guild Global said: ‘As the financial services sector in Ireland is evolving, the securities lending product is an important strategic development. It is not a value-added product, it is a must’.

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