It will not be straightforward to introduce central counterparty clearing to the securities lending market, because of the way the market is structured, according to David Rule, a spokesman for the industry.
Rule is chief executive of the International Securities Lending Association, which has more than 100 members active in lending and borrowing equities and bonds in Europe, the Middle East and Africa. Securities lending is the main way for institutional investors such as insurance companies and pension funds to lend shares and bonds to securities dealers, against collateral in the form of cash or securities.
Speaking to Futures and Options Intelligence on November 25, Rule acknowledged the potential benefits of central counterparty (CCP) clearing and said market participants were warming to it, because of their fears of counterparty risk.
But he argued that there were several issues to overcome before a workable solution could be implemented.
On November 24,...