SEC Follow Up Exhibits Part C SEC_OEA_FCIC_001760-2501

Smith, Kathrin
From: Bisiere, Christophe
Sent: Wednesday, January 03, 2007 9:54 AM
To: Spatt, Chester S.; Mayhew, Stewart
Subject: Securities Lending
Attachments: Length_May_July.bmp; 5_days.bmp; 6_days.bmp; 7_days.bmp; 8_days.bmp; 10_days.bmp;
Length_Jan_Nov.bmp
Chester and Stewart,
Since our last meeting, what I have done is the followings:
• Start with a much larger sample period (Jan-Nov 2006);
• Simulate the threshold list over this sample period. Note that a large sample period is useful to make sure that the
simulated threshold list is fully determined at the beginning of our May-July sample period (for some stocks, a run
of 5 consecutive days such that the threshold criteria are met (or not met) takes a long time to show up in the
data).
• Draw a freq chart of the in-threshold-list run’s length (file Length_Jan_Nov.bmp)
• Build our sample of events. An event is an in-threshold-list run fully contained within the May-July sample period;
with the additional restriction that it must have 5 days of out-of-threshold-list data on both ends (taking care that
these 5 days don’t overlap with another event on the same stock). The goal is to study what is going on 5 days
before entering a run and 5 days after leaving a run.
• Draw a freq chart of the in-threshold-list run’s length over our May-July sample period (file
Length_May_July.bmp). Hopefully very similar to the large sample freq chart.
• Draw for each length the times series of: Lending rate, Fails in % of outstanding shares, Shares borrowed in % of
outstanding shares. I report here the graphs x_days.bmp for which we have at least 20 events.
A quick look at these graphs shows that:
• Fails quickly drop after entering the list.
• There is a strange bump after leaving the list for events of length 6. I must investigate this point further.
• Borrowings in % are almost flat. I must rescale it.
• There is no obvious pattern for the Lending Rate.
I hope that we will have the corrected Quadriserv data soon, which could dramatically increase the number of events in
our sample, and solve this “negative lending rates” issue we had.
Let me know if you can/want to have a short meeting today or if you prefer to schedule it post-Chicago. In any case, I am
still working on the project.
Have a good day, and a Happy New Year,
Christophe
Length_May_July.b
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5_days.bmp 6_days.bmp 7_days.bmp 8_days.bmp 10_days.bmp Length_Jan_Nov.b
mp
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SEC_OEA_FCIC_001826