27 April 2017
London
Reporter: Drew Nicol

Lenders should stick to the scrip


Beneficial owners are "leaving money on the table" by failing to engage in scrip options, heard attendees of the Finadium Investors in Securities Lending conference in London.

One market panellist warned beneficial owners that as much as 80 percent of scrip options are being concluded sub-optimally, meaning a significant revenue opportunity is being missed.

According to IHS Markit's latest market report, the total value of European scrip dividends has jumped 10-fold over the last decade, to reach €26 billion in 2016.

IHS Markit analyst Simon Colvin said: "Scrip dividends are a growing part of the industry's revenue mix."

"The incremental revenue generated does not necessarily incur any additional risk due to the sub-optimal elections chosen by a large part of the beneficial owners community."

Another conference panellist representing a large agent lender commented: "It's so annoying to see so much money being left on the table."

Attendees heard that agent lenders must improve communication with their clients to ensure they are optimising their strategies around scrip options.

The importance of focusing on scrip options has been brought into sharp focus by recent political events, such as Brexit, causing major economic upheaval and significantly increasing the potential revenue to be generated from scrip options and associated trades.

IHS Markit clarified the value of scrip trades for beneficial owners. Last year, lenders earned $106 million in securities lending revenue from the 85 scrip dividends paid by Stoxx 600 constituents, representing 7.2 percent of the European securities lending revenue generated last year.

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