01 September 2017
London
Reporter: Jenna Lomax

Securities lending doesn’t undermine long-only portfolios, experts says


A common argument against securities lending—that it supports short sellers and so undermines the value of long-only portfolios—is without foundation, Simon Waddington of State Street has argued.

Waddington, head of business development and relationship management for Europe, the Middle East and Africa at State Street, analysed IHS Markit data to argue that while it is true that short selling would not be possible without securities lending, “those flood gates have long since opened”.

“What [IHS Markit data shows] is that the available liquidity in the average main index stock is massive,” he said.

“In general, around 95 percent of lendable equities in the market are not lent, according to IHS Markit, so in regular market conditions, anyone who wants to go short will have no problem at all borrowing stock.”

“Market liquidity in these stocks is so deep now that the decision of any one client to lend or not to lend, however large they are, is very unlikely to have any meaningful impact.”

Subscribe to Securities Lending Times, next published on 5 September, to read this article in full.

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