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Sorry to hear that Seb. Do you have any questions I can address directly ?

Glad it was helpful!

Excellent!

Glad it was helpful

May 28th is indeed the day the US goes live with T+1 (Canada goes live the day before) and is rapidly approaching. I can't see any connection between that and Ripple vs SEC. I am co-lead of the securities lending sub-group of the UK Task Force on Accelerated Settlement. The UK (and Europe and no doubt other areas) are considering the implications and issues of shortening the settlement cycle to T+1. It will be interesting!

This will be great for small cash accounts for stock trading.

@@zimmro1 It’s a pleasure to meet you sir What about those facts that all banks switching to CBDC and that fact that T1 or T0 is faster transaction that could be done only with crypto?! Fednow and CLS group announcing integration with crypto same as Swift and all of them partnering with ripple…

I'm happy that you find the videos useful. I have a series of videos related directly/indirectly to risk - the playlist is: th-cam.com/play/PL2mly6ZRZ-7bjuXGnNZyq_XYJejlBBTvD.html But to summarise, there are six key risks: Counterparty Risk (default risk), Market risk (value of securities on loan vs collateral held and any movement in values at the time of a counterparty default), Operational risk (it's a complicated business with 1,000s of trades, changing prices and multiple markets and currencies - lots of things can go wrong), Legal risk (ensuring an understanding of what would happen across multiple jurisdictions in the even of counterparty default), Regulatory risk (rules can change) and Reputation risk (engagement with short selling, instances of abuse over the years).

Welcome to the channel ... hope you find the videos helpful

The CSD. Not sure if it goes anywhere from there

The penalty goes to the party that didn't fail ... so an efficient operation ends up making money from it, although that is not the intention behind the penalties.

Thanks for your comments, much appreciated. One of the key trends over recent years that is continuing is that retail investors have been able to access lending revenues and increasingly be able to short securities. Usually the "behind the scenes" is invisible though so lending fees may be used by the broker to support "zero fee" trading. So my advice is to speak with your existing broker and other firms to see the type of access available and what happens to fees or costs. High Net Worth individuals are getting even better access to lending markets these days as technology has enabled more intermediaries to access the borrowing/lending business.

The "long box" represents the assets that a collateral giver has available to use for collateral obligations. It's the opposite of being "short" where you need to borrow to fullfil your delivery requirements. Long positions come any securities the firm purchases, borrows, repos in (reverse repo) and financed client positions.

When mentioning "balances" I refer to loan values outstanding.

Your comments are much appreciated!

I really appreciate you taking the time to comment!

Much appreciated. Feedback that I get from the market is that it hasn't had as much of an impact on market participants' behaviours as some expected. What's your view?

Hi Roy. I believe there has been an impact on Fail rates across the industry in EMEA. Not so much at all on the Fixed Income side.

@@whtwht there has, but ironically fixed income was the primary driver behind the penalties. Most stock exchanges already have buy-in procedures that are punitive. As bonds don't really trade on exhange (even when they are listed), there hasn't been a mechanism to penalise fails there beyond interest claims. With interest rates so low for so long they needed something to push for efficiency.

As you write, virtually all securities lending transactions are open - meaning that either the borrower or lender can terminate the loan at any time for any reason with a maximum close out time of one normal settlement cycle for the relevant market. So in that sense, it is a lower risk transaction. Just as a simple example, if you had two trades - one open and one fixed term - with Lehman Brothers and you got worried ahead of the default, the open trade could be closed down whereas the fixed term trade couldn't be.

Thanks for the comment!

Much appreciated - we get many viewers and training students from India!

I can't speak for the US, but in Europe, the balance sheet is meant to reflect the economic characteristics of the entity's transactions. In other words, the cash borrower is using its securities to borrow cash while creating an obligation to repurchase the asset. As such it increases the balance sheet, reflecting the leverage resulting from the transaction.

I think you may have missed the point. If an ETF lends a stock, the borrower (short seller) delivers a real stock to the buyer. The buyer gets a real stock that it can lend to any other borrower (rinse and repeat). So the same shares are loaned out twice (or more times) in that example. If you consider that as obfuscation, so be it.

What you suggest makes sense, however it is due to the differenet accounting treatment for cash and securities in securities lending transactions. For cash collateral, the borrower is required to "gross up" and show both the cash and the securities whereas in a non-cash, essentially the securities in and the securities out net-off.

@@zimmro1 Ah understood. Thanks again Roy!

Thanks Leslie - email me at roy@pierpoint.info

Hey, thanks for visiting after the show and your question below. First, I'll send you the ebook "Intro to Trading Strategies that involve Securities Lending". Jus DM me your email. As to your question, IF (and it's a big IF) all or most or possible even much of the free float of a company was put into the Direct Registration System, then those shareholders could then control whether shares were loaned out so short sellers. The reason I think it's a big IF is that the majority of stocks are held by big institutional shareholders that would find it cumbersome given that most invest through multiple investment managers that are hired and fired from time to time. Additionally, and importantly, securities lending revenues make a key contribution to keeping costs low for many ETFs and mutual funds. The elimination of lending fees would make funds more expensive for investors. Finally, there are some investment managers that run a lending program for their own funds and charge a fee for that service. Nobody I know willingly gives up income. All told, I think there are too many incentives for DRS to take control of the wider market. HOWEVER, for a particular stock, that just might be doable if you have enough supply in the hands of sympathetic (or motivated) retail and institutional investors to impact the supply of stock. However if people check out my "GameStop free float" video, you will get the idea that a small amount of free float in the hands of a lender can fuel a lot of lending activity th-cam.com/video/FYaj484daaY/w-d-xo.html

Awesome, thank you! Let me know if there are any specific topics you'd like to see covered.

Nate, we are here to listen and serve! Thanks for the suggestion.

Thanks Vee!

Great suggestion. I’ll add it to the agenda. I plan on doing one video each month reviewing revenues and can add the top earning stocks to that.

Thanks Lucia - I’m glad you found it useful.

Thanks again!

Much appreciated. Any related topics you'd like to see more about?

Hi! Glad you liked the video. What a great question and I have to say I'm surprised no one has ever asked me that before. *Triparty* (or sometimes spelled *"tri-party"* ) refers to outsourced collateral management administration. The borrower and lender agree on which of the half dozen or so triparty agents to use where the borrower will hold collateral or deliver collateral to which the triparty agent will use to satify the lender's collateral needs. They agree collateral schedules and on a daily basis the borrowers and lenders report to the triparty agent the value to be collateralised. The triparty provider then allocates collateral accodingly (on an automated allocation/optimisation basis). *Third party* arrangements (aka *non-custody* ) is an arrangement whereby the lending agent is not the custodian of the assets - the owner of the assets appoints a third party to lend its assets. So the third party agent lender agrees and maintains the transactions with the borrower and instructs the custodian of the assets to deliver or receive securities based on lending activity. That is an extra step that occurs internally when the agent lender is the custodian. It adds an extra operational step and more direct costs, but also permits third parties that have some kind of "edge" to promote it. Some asset owners will have hybrid lending programmes which combine custodial-based lending with one or more third parties. (Note that many custodial lenders also offer their lending programmes on third-party basis as well). In other words Triparty is outsourced collateral management, whereas Third Party is about the separation of custody and lending.

Hi - thanks for your message and kind words. I have reached out to some of my contacts to see if I can get more insight than the pure rules.

Thanks very much Amil. Hope you are keeping well!