Canada


The stability of the Canadian securities borrowing and lending market has given domestic players the confidence to conduct cross-border business

The likes of CIBC Mellon and Scotiabank—two of the bigger Canadian outfits—have boosted their cross-border capabilities in recent years, signalling to the wider world that they are global players in securities borrowing and lending.

For example, Scotiabank’s prime services division has securities lending desks in London, New York and Singapore, and it boasts the financing of US convertible bonds in its product offering. In 2011, the bank acquired a synthetic prime brokerage platform and team from Daiwa, further enhancing its prime brokerage capabilities.

James Treseler, managing director at Societe Generale Corporate & Investment Banking, says: “Why are Canadian banks so attractive outside of Canada? Everyone loves Canadian balance sheets—they’re conservative, and very liquid. During the banking crisis, no Canadian banks were affected.”

“As we’ve seen more and more regulation in the US and Europe, it’s forcing some of the larger players on both sides, of the market—whether it be in agency lending side or prime services—to scale back some of their activities. There’s market share available to Canadians. I think they see that as global market share.”

Canadian banks are moving into Europe, South America and Asia, says Treseler, but how are securities lending heads convincing their bosses to set up desks?

“If I was them, I’d be pointing at the market share that is available to us,” explains Treseler. “If I have a prime services group, that means I have to be able to cover European underlying, which in turn means that I have to be in Europe.”
“You can be in Hong Kong and cover Australia, but you cannot cover Europe from Toronto, in the same way that you cannot cover the US if you’re in London—you’re just not in the market.”

Europe in particular has always been an important source of demand and revenue for Canadian beneficial owners, says Rob Ferguson, who is president of the Canadian Securities Lending Association and senior vice president of capital markets at CIBC Mellon. He adds that “demand for the securities belonging to Canadian owners is always strong”.

“In the last couple of years, the demand has fallen off a bit, and the size has dropped somewhat. In terms of whether it is becoming more important, I would say probably not. But you always have to look and see whether having a local presence is going to generate more opportunities and revenue for your programme participants, and sometimes that answer is going to be yes—even when that market isn’t at its highest.”

In October last year, CIBC Mellon and BNY Mellon announced they were merging their securities lending desks, a move that would give the former’s clients new opportunities for incremental revenue in markets around the world and the latter’s clients the potential for improved returns on Canadian securities.

Commenting on the merger last year, Ferguson said: “[BNY Mellon’s global head of securities finance] James Slater and I began talking a few years ago. We discussed the challenges and the market, and realised we had a unique opportunity here in that our programme, which has been very successful since the beginning, had one desk, in Toronto. We had people who would come in early in the day to cover the European time zone, but there was some limitation around servicing the world out of just Toronto.”

“James’s group is significantly bigger, and has desks in Hong Kong, London, New York and Pittsburgh, but BNY Mellon doesn’t have a desk in Toronto. Canada is a very large and important market in securities lending and James saw an opportunity for BNY Mellon clients to be better served in the Canadian market.”

Ferguson explains: “The continued importance of cross-border demand was in fact a key aspect of our decision to merge CIBC Mellon’s lending desk with BNY Mellon’s.”

“We did a very good job of lending European securities for our beneficial owners prior to the merger, but having the BNY Mellon local presence has made it easier for us to do that and resulted in more opportunities.”

“I think people are generally going to look and say, ‘what is the size and cost of the opportunity’, weigh that against the relevant risk factors, and go from there; having a strong local presence can in some cases put you in a good position to gain insight into both opportunity and risk factors.”

Concluding, Ferguson says that Canada has enjoyed a period of relative strength and stability.

“We as much as anybody else in other jurisdiction, are focused on finding efficiencies and making sure that we are managing risk appropriately. We are in a good position to realise some opportunities without some of the pressures that other jurisdictions may have.”

Country profiles
The latest country profiles from Securities Lending Times
Francisco Thiermann of IBM says the imminent launch of Chile’s securities lending blockchain solution will provide a shot in the arm for the market
Zubair Nizami, head of Asian securities lending trading at Brown Brothers Harriman talks to Drew Nicol about the state of the industry in the region
Asset Servicing Times

Visit our sister site
for all the latest asset servicing news and analysis

assetservicingtimes.com
Being an exciting emerging market is all well and good, but how long can that status really apply before interest wanes? India is doing its best not to find out
Hugh Leonard, director of repo sales at Australia and New Zealand Banking Group, explains how the Australian market has excelled in recent years
Securities lending is in a strong place in Australia. Dane Fannin, head of capital markets in the Asia Pacific at Northern Trust, explains the available opportunities
Federico Ortega Gilly of Mexico’s Nacional Financiera explains why his country’s securities lending market is ripe for foreign investment
Russia’s National Settlement Depository has had a busy year making its securities finance market more robust and attractive to outside investors. The CSD’s Alina Akchurina explains the innovations being implemented
South Africa’s securities lending industry is on the verge of embracing a modern T+3 settlement cycle that could boost the country’s market
Features
The latest features from Securities Lending Times
ESMA has set about tackling the thorny issue of conflict of interests within central counterparties under EMIR, with the help of industry participants. Jenna Lomax examines the industry’s responses to the consultation
Collateral managers must embrace innovation and strive for greater efficiency in processing. Jenna Lomax reports from Amsterdam
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Anand Krishnan of Natixis Americas explains how regulatory pressures are changing the rules of the game and buy-side entities are changing with it
David Raccat, CEO of Wematch.SecuritiesFinancing, offers a technological recipe for success as the market becomes more demanding and complex
Donald Trump’s presidency has caused all kinds of controversy, but what about his plans for banking regulation? Experts debate his plans to do a “big number on Dodd-Frank”, Obama’s flagship post-crisis legislation
For those on the front lines of the securities lending industry it’s easy to forget that, for beneficial owners, the trials and tribulations of regulatory compliance and the ever-raging debate around the use of central counterparties (CCPs) are only of passing concern
Mirae Asset Securities (USA) is now operational in the securities lending, repo, foreign research distribution, corporate access and agency execution businesses.
Experts debate whether equities as collateral will ever be acceptable
Interviews
The latest interviews from Securities Lending Times