ISSUE045 - Securities Lending Times

“Net flows were positive, against a backdropof record low outflows,” said Hans Hufschmid,CEO, GlobeOp Financial Services.Over the last 12 months, the hedge fund administrator’sCapital Movement Index has advanced13.5 points.Securities lending pops up atAFME liquidity conferenceSecurities lending operations and repo marketsneed to “come back” to successfully deleveragethe system as a whole, said a leading economistat AFME’s European Market Liquidity Conferencein London.A panel of economists discussed the unintendedconsequences to the financial system asa result of pressures on banks to deleveragesome $3 trillion. One panelist noted that taking“financial plumbing” such as securities lendingand repo markets into account bumped that figureup considerably.“Central banks tend to look at the monetary angle...butlooking at repo and securities lendingoperations, those numbers are as big. Inflationand monetary policy [fail to take into account]that the world is a lot more complex than that...the financial plumbing aspects of deleveraging,which is in a way the system-wide use of all sortsof collateral to reduce market risk, need to be factoredin...those pieces need to come back, that iswhat will complete the system,” he said.In 2006, the Federal Reserve stopped publishingfigures tracking M3 money supply, which includesrepo and securities lending market paper. TheBank of England and ECB continue to track it.Probably the hottest topic during the conferencewas Greece’s debt crisis, about which aOnlineStockLoan TMwww.OnlineStockLoan.comOnlineStockLoan introduces a unique way of helping our customerssucceed in the Global Securities Lending market place. Our experienceallows us to build state of the art Global Securities Lending solutions utilizingcloud technology.Below are the available solutions through OnlineStockLoan.Global Inventory ManagementSecurities Lending Desks& Prime Brokers can uploadproprietary and distributedinventory from other sourcesinto the module.Customer Short Sale LocatesAllow the correspondentor retail customer torequest locates througha web interface usingan API.Global Lend ApplicationA front to back InternationalSecurities Lending application.Our application can be used asbuilt or we can customize toenhance your requirements.OnlineStockLoan is provided by Tullip Tree Advisors, a global finance andtechnology advisory firm. Our professional staff can provide consultationin the market place and help with design and implementation of any sizeproject around the world.For more information contact us at:Info@OnlineStockLoan.comCopyright © 2012 Tullip Tree Advisors, LLC.Pre Borrow ManagementProvided by:4Track requests andcharge back borrowrate plus a fee alongwith the cost of capitalthrough settlement date.Customer Rebate BillingTracking the borrowversus settle short salescenario allows the teamto bill the user for the costof the negative borrow.Query Report WriterCreate customized reports tomeet the needs of your team,your company and yourcustomers.www.TullipTree.comNewsInBriefwide variety of lively opinions were expressed.However, some speakers noted that Greece isnot the problem, unwinding the problem is goingto be the problem. Thought the LTRO is widelyviewed as a positive development, it is alsoseen as a measure which delays facing politicalpain.Clearstream GSF services upeight per cent in JanuaryGlobal Securities Financing Services at Clearstreamlifted eight per cent year-on-year, reaching€594 billion monthly average outstanding inthe first month this year. The combined servicesinclude triparty repo, securities lending and collateralmanagement.In Investment Funds services, 480,000 transactionswere processed, a five per cent decreaseover January 2011. The value of assets undercustody held on behalf of customers decreasedfour per cent to €11 trillion. Securities held undercustody in the international business decreasedone per cent to €5.9 trillion while domestic Germansecurities dropped six per cent to €5.1trillion in January 2012 compared to the samemonth last year.In January 2012, three million internationalsettlement transactions were processed, an 11percent decrease over January 2011. Of all internationaltransactions, 80 per cent were OTCtransactions and 20 per cent were registeredas stock exchange transactions. On the Germandomestic market, settlement transactionsreached 6.6 million, nine per cent less. Of thesetransactions, 67 per cent were stock exchangetransactions and 33 per cent OTC transactions.Which short selling ban is leastdamaging?A new academic study argues that a ban on nakedshort selling is the least damaging to marketefficiency of all short selling regulations.Looking at European regulations between July2008 and June 2009, researchers from the UniversityLibre de Bruxelles found that coveredshort selling bans raise bid-ask spreads and reducetrading volumes, disclosure requirementsraise volatility and reduce trading volumes whilenaked short selling bans raise both volatility andbid-ask spreads. In addition, the researchersassert that no regulations are effective againstprice decline.“Overall, all short sale regulations are detrimentalto market efficiency. However, naked shortselling prohibition is the only regulation thatleaves volumes unchanged while addressingthe failure to deliver. Therefore, we argue thatthis is the least damaging to market efficiency,”the study said.Researchers analysed fourteen European marketsover the one-year period, studying the ef-www.securitieslendingtimes.com

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NewsInBrieffects of a variety of regulatory regimes on marketefficiency. They compared the effects of threecategories of short selling regulations – prohibitionson covered and naked short selling, nakedshort selling only and requirements to discloseshort positions to the market’s regulator - on individualstock’s bid-ask spreads, intraday volatility,trading volume and weekly returns.Though covered short selling prohibitions areassociated with higher returns and lower intradayvolatility, the effects are transitory the studyshowed. Meanwhile, naked short selling banspermanently raise intraday volatility and bid-askspreads but have no impact on either volumes orstock returns, even in the short run. Disclosurerequirements, meanwhile, reduce trading activityand increase volatility, also permanently.Still, the study does point out that disclosureregulation regimes result in lower bid-askspreads, as was the case during the financialcrisis, when information to the market islikely most beneficial to efficiency. This couldindicate that disclosure requirements increasereporting costs which uninformed short sellersshy away from.“Hence, sell trades become more informativebecause they more likely originate from wellinformedshort sellers. Lower bid-ask spreadscould also indicate that the informational benefitof disclosure outweighs the informational lossstemming from missing short sales,” the studysaid. Other findings show that in the long run,stock returns are insensitive to short selling regulationsthough there is a short-term overvaluationeffect, which can be “exploited by marketauthorities in crisis situations”.“As far as market efficiency is concerned, ourresults thus raise serious doubts on the adequacyof both the existing national regulations andthe pan-European proposed harmonisation currentlyunder discussion,” noted researchers.Mixed bag for securities lendingin M&A trendsGlobal economic uncertainty and regulatorychange will continue to impact M&A in the comingyear, according to the latest trends insightsby Clifford Chance. Despite the unsettled globalpicture, activity is continuing and, in some areas,the law firm expects to see significantly moreconfidence in doing deals as the year progresses.“Once confidence returns, the fundamentals arecertainly in place for M&A activity to increasesignificantly as we move through 2012 and into2013,” said Matthew Layton, global head ofCorporate at Clifford Chance. What that mightmean for the securities lending market is inquestion however since one of the prime driversare significant cash reserves on corporatebalance sheets and liquidity in PE funds, whichare likely to seek out good deals. If activity leanstowards cash deals, opportunities for arbitragemight be limited.David Lewis, SVP at SunGard Astec Analytics,said that corporations are indeed sitting with alot of cash on their balance sheets which maybe burning a hole in some pockets. He expectsthat a significant portion of M&A activity will befinanced from cash rather than raising debt andas a result, growth may not result in an uptick inthe securities lending market.At the same time, energy, mining and utilitieswere the most active sectors in 2011, representingsome $557.7 billion of the total $2.2 trillionin global M&A. And going into 2012, there is expectedto be a continued fight to secure naturalresources and energy assets, according to CliffordChance.The recent announcement of advanced mergertalks between commodities group Glencore andminer Xstrata could be an indication of things tocome. Commenting on the deal, Chris Searle,corporate finance partner at BDO, said that themerger is no real surprise given that Glencorealready owns 34 per cent of Xstrata and Glencore’sIPO last year has now given a publicvaluation for its shares that can be used in an allshare merger. The combined entity will easily bethe largest among rivals such as BHP Billiton,Rio Tinto or Anglo American.According to Astec Analytics data, Glencorehad some 105 million shares on loan shortlyafter the announcement, while short positionson Xstrata dropped about 20 per cent. “I wouldexpect more on loan for Glencore over the nextfew weeks, but as an all share deal, it is goingto be very interesting and potentially very profitablein the lending market,” Lewis notes.6Meanwhile, analysts are chiming in on whetherthis merger, if it overcomes hurdles in the comingmonths, heralds more such transactions.“Whether this merger triggers another round ofconsolidation in the industry remains to be seen,given anti-trust concerns around the world, butother companies may feel forced to merge justto keep up with this new giant,” said Chris Searleof BDO.Global M&A snapshotLast year, global M&A activity increased 2.5 percent over 2010 and transactions totalled $2.2trillion. While 2011 was the strongest worldwideperformance since 2008, activity levels declinedfor each quarter during the year and a numberof headline deals collapsed. The second half of2011 saw a significant decline in M&A as the eurozonecrisis reached a feverish pitch – M&A inAsia Pacific dropped 31.9 per cent, EuropeanM&A declined 28.7 per cent and the US saw a9.3 per cent drop quarter-on-quarter.Cross border M&A remains a continuing trend –deals between individual countries represented41.5 per cent of global M&A in 2011 and dealsbetween regions are up 19.6 per cent over2010. The escalating eurozone crisis continuesto remain a risk factor to M&A growth.“The key issues are around liquidity and funding,as all businesses are potentially impacted bybanks’ exposure to the continuing crisis. Wheresovereign debt of Eurozone countries is downwww.securitieslendingtimes.com

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NewsInBriefgraded, this has knock-on effects for domesticbanks and ultimately for domestic organisationsaccessing finance or having to refinance. M&Aactivity is being affected as confidence decreasesand the spectre of a double-dip recession inmany developed nations increases,” noted CliffordChance.“The risk of a euro exit by one of more eurozonecountries continues to be very low, but buyersand sellers need to be mindful of that possibility,as well as other emergency scenarios, inrespect of current and future M&A transactions.Due diligence to assess and analyse key areasof risk where the target operates in a potentiallyaffected eurozone country is advisable,” the lawfirm adds.Northern Trust says LA lawsuithas “no merit”Northern Trust has denied wrongdoing in responseto a lawsuit filed by the Los Angeles cityattorney against the firm and Pension ConsultingAlliance over securities lending cash collateralreinvestment losses. LA’s city attorney,Carmen Trutanich, filed the suit on behalf ofLACERS, the Los Angeles City Employees’ RetirementSystem.In a released statement, the firm said, “Thelawsuit was not filed by LACERS, with whomNorthern Trust has an excellent, long-standingand ongoing relationship. Northern Trust hasacted as the primary custodian and as a securitieslending agent for LACERS since 1991...Thefacts show that this civil lawsuit...has no merit...As LACERS’ lending agent, Northern Trust appropriatelyinvested cash collateral according toLACERS’ own guidelines.”The Office of the City Attorney alleges thatNorthern Trust claimed that investments madeby the company on behalf of LACERS were “lowrisk” or “minimised risk,” including conservative,short-term, highly-liquid investments. However,from June 2006 until June 2008, Northern Trustfailed to inform LACERS that it had changed itsSLT 184x60_quarter strip_Layout 1 04/11/2011 13:00 Page 1investment strategy in violation of common lawfiduciary standards. The company allegedly providedno details of each specific investment inthe City’s portfolio, including the current marketvalue of each investment.Other allegations made by the City involveclaims that Northern Trust behaved inappropriatelyto stop a collapse in certain managedinvestment pools by convincing investors not topull money, putting the firm’s interest above theinterest of individual pension funds.Northern Trust points to the fact that LACERSdid not lose money on its securities lending programmeand, in fact, has earned tens of millionsof dollars over the past 20 years. Moreover,even with losses incurred in 2008, the pensionfund is ahead.In 2008 LACERS experienced unexpected lossesin its securities lending custom fund - whichit created, established guidelines for and monitored.The losses were mostly due to investmentsin several fixed income securities. Thosesecurities were highly rated, within investmentguidelines set by LACERS, and held by pensionfunds throughout the country, said Northern Trust.“The city attorney’s suit, brought years after thelosses were incurred, is based on hindsight. Itis premised on the legally deficient claim thatNorthern Trust should have predicted unprecedentedevents even though the markets as awhole had not,” the firm said. “We regret thatthis meritless lawsuit will likely cost the LAC-ERS pension plan, and the city of Los Angeles,millions of dollars in unnecessary legal fees andout of pocket expenses.”The lawsuit seeks full restitution for losses, as wellas damages that LACERS sustained as a result ofNorthern Trust’s false claims, civil penalties up to$10,000 for each false claim, and $2,500 for eachviolation of the Business and Professions Code,and all fees and costs associated with the lawsuit.Real-time Exposure ManagementAccurate collateralisation just became a little clearerwww.pirum.com/exposure8www.securitieslendingtimes.com

Developing unique performance solutions.Customized Securities Lendingperformance. For more information please call: Zurich +41 44 335 11 21*, New York +1 212 325 7625*.credit-suisse.com*We would like to inform you that all conversations on our phone lines will be recorded. When we receive your call, we assume that you agree to this business practice.

Open SourcedCiti’s David Martocci speaks to SLT about how the provider hasevolved its securities lending offeringANNA REITMAN REPORTSOver the past thirty years, Citi’s securities lendingproduct, OpenLend has grown from a smallcustodial lender to one of the premier globalagent lenders in the business. David Martocci,managing director and global head of sales andclient management for Citi’s Securities Financebusiness, describes OpenLend as “an openarchitecturesecurities lending offering that providesclients with a boutique service designedto enhance portfolio performance by deliveringcustomised solutions”.SLT catches up with him at the IMN BeneficialOwners Conference in Arizona to find out moreabout OpenLend and get some insight into howmarkets are shaping up as securities lendingbusiness drifts back.SLT: You seem to have had a securitieslending role in every bank – whyend up at Citi?David Martocci: Citi was an interesting opportunity.I have a lot of experience in the securitieslending business specifically in the third partyspace. I have previously been instrumental in

uilding third party businesses at J.P. Morgan,Lehman Brothers, Deutsche Bank, and Dresdner.In looking at Citi, I saw a business with exceptionalpotential for growth in this space. Citi’sglobal presence and the depth of its relationshipswith many of the world’s most importantinstitutions presented a tremendous opportunityfor expansion. What also drew me to Citi wasthe quality of talent of the people and the levelof commitment of senior level management tothe business, in terms of continuing, developingand growing it.Clients arechoosing betweenthe benefits of eithera custodial or thirdparty programme,they are looking atreinvestment options,lending structures,how they want tolend, what theywant to lend, andin what marketsSLT: What was the impetus fordeveloping the OpenLend brand?Martocci: When I think back and look at why wedecided to rebrand, obviously we spent a lot oftime with clients and prospects discussing theirneeds and objectives, how they envisioned thebusiness going forward. At the IMN conferenceyou hear a lot about bundling and unbundlingand trends, but honestly I feel that the real driveris what clients are saying. OpenLend was reallyjust about spending time with clients, understandingtheir needs, and providing them with asecurities lending offering that is about choiceand developing customised solutions.SLT: How has this evolved from whatsecurities lending used to be?Martocci: If you look at how the business wasback in the late 80s and early 90s, securitieslending was a check box on a custody agreementand clients were placed into boxed solutionswhich did not offer customisation to theirunique requirements. Obviously since then wehave come a long way. After everything thathas transpired over the last four years, beneficialowners have realised that participating in aprogramme that is flexible and offers the abilityto tailor their programme is really what makessense. I feel that clients can then go to theirmanagement and demonstrate that they spentthe time in analysing and structuring a programmesuitable for their needs.SLT: What choices are clients making?Martocci: We work one on one with our clientsto understand what their needs and objectivesare. We need to understand the risk and returnprofile of their institution and how we can adaptour program to fit within this framework. Clientsare choosing between the benefits of either acustodial or third party programme, they arelooking at reinvestment options, lending structures,how they want to lend, what they want tolend, and in what markets. They are also lookingat a combination of various programmes interms of whether they would like an exclusive,an agent structure or a hybrid. At Citi, we areable to leverage our industrial strength andglobal expertise in delivering the white gloveservice which our clients have come to expect.SLT: How about collateral choices,do you see any trends there?Martocci: Either way you look at it, whetherthe client takes cash or non-cash collateralthe market trend is all about providing choicesfor clients. For example, is the client an assetmanager? Do they want the cash collateralback or do they choose external managers? Ifthe client chooses external managers and justwent through an RFP process and selectedsomeone to manage their medium term fixedincome portfolio, for example, that means theywent through their board, they went throughthe approval process and they did their due diligence.Well, if those approvals are OK and theasset manager has a money market offering,why not give the same counterparty the cashcollateral to manage? At the end of the day,your securities lending provider could be yourlargest single asset manager, then the samedue diligence should apply.That is how our programme is structured. Butwe have always run an intrinsic style programme,so Citi never had pooled investments.We are very fortunate in how the programmewas structured and developed. It helped in thetough years that we have just gone through andwe continue to refine and develop it as marketconditions indicate.SLT: What might some of the customisationlook like?Martocci: Let’s say a client has a corporatebond portfolio with high yield corporates whichthey are concerned about lending. Customisationis really in finding out what the portfoliomanager is concerned with. Are they lookingfor trading volume or price? So developing aprogramme for that client based on their needsand making them comfortable based on, for examplethe last three days trading volume is anintegral part of our programme.DavidMartocciSLT: You recently opened an LA office,what was the push?Martocci: We’ve developed and grown ourbusiness in the Americas in the last few years.The Los Angeles office is about US-basedmarket growth and looking at where our clientsare located. We can better service clientsby expanding the hours for our relationshipmanagement team and Citi has always hada fair amount of business on the West Coast.Looking at the development of business overthe last 18 to 24 months, it has made a lot ofsense to have the staff out there, both froma relationship management and product salesspecialist standpoint.SLT: Asia is always big news, how isyour presence there developing?Martocci: We’ve always been there. I see someof these press releases for Taiwan launchesbut we have been there over five years. So forus, it is about continued expansion. Some ofthese markets are true and tested so havingthat footprint is definitely an advantage for ourclients and we are taking full advantage. Ourrecently launched Australia trading and productgroup has been very successful in expandinghorizons and developing new opportunitiesand business.SLT: I often hear that one of thechallenges in Asia is a “fragmented”market place – how do you seethat developing?Martocci: I think that fragmented can be anegative term. I see it more like independence.As compared to the securities lendingmarket in Europe where regulations aremore broad-based, the regulations that governmany of the countries in Asia are specificto each market. We will continue to see that,especially in the current regulatory environment,and rightfully so. Obviously peoplewant to have a say over what is going on andhave an overall awareness. SLTDavid MartocciManaging director, global head of sales andclient management, securities financeCiti11 www.securitieslendingtimes.com

AsiaThe only general conclusion one can draw about securities lendingmarkets in Asia is that they present tremendous opportunityANNA REITMAN REPORTSBecause it is a huge continent of a wide varietyof markets in various stages of developmentunder the protection of numerous regulatorswith individual sovereign interests,Asia is a tough region to generalise about.But where there is growth, there are investorssharpening the focus to see details, andit is likely that it will be emerging marketswhere watchful eyes keep tabs on securitieslending market developments.The macro picture for developed markets showsweakness. Asian markets continued to driftlower in the fourth quarter of 2011 on the backof the European sovereign debt crisis and theimpact of a slowing global economy on China’sgrowth as well as the pull back in commoditiesand resources, according to a recent reportfrom RBC.RBC adds that sectors such as the consumer discretionary,banking and real estate continued to attractlending demand though borrowers are usinginternal inventory to cover shorts resulting in substantiallyreduced demand from traditional lenders.The hot spot for revenue growth is Hong Kong,where average income from securities lendingincreased 50 per cent in the last three months of2011, from 16 bps to 22 bps, according to DataExplorers. This, it adds, was down to reratingsince the demand to borrow was fairly constantthrough the quarter.“The big question is for how long this juicylending environment will last. With news ofChina’s trade surplus reducing, some commentatorsthink a stimulus could be aroundthe corner. There is nothing like a centrallyplanned boost to the economy to set fright toshort sellers betting on the China slowdown,”says Data Explorers.

RegionalProfileWayne Burlingham, global head of securitieslending at HSBC Securities Services, identifiesHong Kong as the most exciting developedmarket in Asia currently, where he has seenrevenues pick up across the board in a mostlyspecials environment of consistent demand.Meanwhile the regulatory environment is stillconducive to international players, he adds. Giventhat economic conditions remain the same,he anticipates that the island will continue to bea good place for securities lending business.“The whole of Asia is an exciting region for HSBC.If you look at the number of potential lending marketsin the east versus the west, for example Malaysia,Philippines and beyond that Vietnam andIndonesia, from an agent lending point of viewthere is a lot of justification in keeping a close eyeon Asia versus Europe and the US. It is a regionof great potential basically,” he notes.He adds, however, that the real growth sectors forsecurities lending markets generally, such as collateraltransformation trades, do not apply to Asiato the same extent as they do in Europe and theUS. The region is still about borrowing stock asopposed to seeking other trading opportunities.That may be because so many of Asia’s marketsand exchanges are in development. Meanwhile,just as developed markets are seeing challengesto economic growth, emerging economiesare exhibiting strong fundamentals. The localmarket ending 2011 as Asia’s best performerwas the Philippine Stock Exchange (PSE), witha four per cent gain. Capital raised on the PSElast year hit a peak of PHP 107.5 billion ($2.5bn)and there are indications that the exchange’sleadership would like to see the market upswingget a further boost by introducing ETFs and securitieslending in the second half of this year.The market slightly ahead of the Philippinesin terms of development is Malaysia’s, whichissued new rules recently making the environment“more lender friendly” Burlingham adds.For example, if a stock is on loan, it can be soldwithout being considered a short sale. He predictsthat regulators and market participants willcontinue to work through other barriers to openup the Malaysian market.China v IndiaAs the two powerhouse economies in Asia,mainland China and India are subject to their fairshare of speculation on when and how securitieslending markets will open up or improve. Thereis plenty of work to be done in both, but whereasIndia has an established market, mainland Chinais yet to allow entry to international participants.Commentators have noted that though mainlandChina has had forward momentum overthe last couple of years, when any initiatives areannounced in the public domain, markets take adive. From the point of view of Chinese regulators,it is a daunting task to expose markets tothese kinds of forces.“If you are the regulator hitting the green button,even in quiet market conditions that is a bigleap of faith. But if you can imagine going forit in the turbulent markets we have right now,when volatility is at historic levels, that is a massivecall for any regulator. So for anyone to thinkthe market can suddenly go from nothing to beingwide open in a short space of time… that isjust not that likely to happen,” Burlingham says,adding that he does not expect to see too muchdevelopment in 2012.The same is true for India, where the market hasarguably been relatively slow to develop. Rulesthat are in place are not particularly friendly tolenders or borrowers, explains Burlingham, andhe would need to see further rule changes tofeel comfortable. Moreover, he does not seeborrowers actively pushing for supply.“Until it gets to the point where everyone feelsquite comfortable it will remain a very limitedmarket...where we have to do things very differentlythere are risks, pure and simple. The marketpreference is always to have a lightly regulatedmarket with professional participants in it. We arehappy to work to a reasonable set of rules, butIndian regulations are very tight comparatively.At the same time, it may be that India is happyto have a domestic market without internationalparticipation. Each country has its own ways ofdoing things and these choices may suit theirmarket right now,” Burlingham says.Fixed income spaceAt the same time, advocacy group ASIFMA(Asia Securities Industry & Financial MarketsAssociation) is watching developments closelyin the Indian repo markets. Almost all of the repomarket is overnight, which contributes to anabsence of liquidity in the underlying markets,notes Nicholas de Boursac, CEO of ASIFMA. Inaddition, there is still some progress yet to bemade on issues such as title transfer and eliminatingshort selling restrictions.A working group is currently preparing to makerecommendations for measures to improve secondmarket liquidity. A report is anticipated bythe end of the first quarter this year.“I think it is going to become more and morebroadly accepted within Indian governmentcircles that they need more foreign financingfor the expansion of their economy and infrastructures,and therefore I expect, because governmentdebt is going to carry on growing, thatthere will be changes in regulations which willmake investing in India’s government securitiesmore attractive as they face that economic reality,”de Boursac says.At the moment, ASIFMA is focused on the fixedincome markets in India, China and Korea.Similar to India, China still needs to make progresstowards what de Boursac calls “a classicrepo market”, in other words, one where there isproper transfer of title, documentation, tax andaccounting treatments and liquidity. Some 85per cent of China’s domestic RMB repo marketis pledge repo, while the remaining 15 per cent14of title transfer repo is not suitably documentedand short term. He expects to see improvementwithin the next two years but does not anticipatethat the country will see any “major disturbance”in financial markets in 2012.“China has taken the decision that they want tomake their markets more liquid and deeper andin some ways more integrated with the globalmarkets, so that is a debate that is settled. I doanticipate some changes, but 2012 is a difficultyear. There is a political transition underway andtypically some of the reform agenda gets delayedso as not to get in the way of the political process.But I suspect once this transition is over, we willhave some rapid progress in terms of modernisingthe financial system,” de Boursac says.Of all the markets straddling the emerging/developedclassification fence, Korea is noteworthyfor both its repo development and recenthardline stance on short selling restrictions. Interms of the won repo market, ASIFMA pointsto continued growth - outstanding volumes havequadrupled to some $20 trillion won ($17.8 billion)in the last three or four years. Outside ofJapan, Korea has one of the most developedfixed income markets in Asia.The country is also going through a leadershipchange with elections this year. Along with achange in government, there is some anticipationthat short selling restrictions introduced in the summerwhen markets plunged could be reversed.“Most technicians will tell you that short selling isgood for markets and works for market liquidity,but you will find that those regulations are put inplace for political reasons. I suspect that if thereis a change in government there is a possibilitythat they will reverse those rules, but of coursethere are no guarantees,” de Boursac says.Regulatory arbitrage?Both Wayne Burlingham and Nicholas de Boursacnote that the global regulation conversationhas far more to do with the west than the east.Burlingham explains that many of the Europeanand US regulations such as Dodd Frank or BaselIII affect western holders of Asian assets toa greater extent.De Boursac takes issue with comments, whichinfer that Asian banks will compete for businessby engaging in regulatory arbitrage. He pointsout that the loan to deposit ratio in Asian banksis far more favourable and dependency onwholesale funding is considerably lower than inEuropean institutions at the moment.“Can you treat Asia as a group? You can in certainareas, such as the fact that most sizeableAsian banks will probably be Basel III compliantbefore European banks…but if you look at sophistication,these markets are not fully developedin many cases and that is the challenge– to get markets to develop rather than regulatethem,” de Boursac says.www.securitieslendingtimes.com

Securities LendingCustomized solutions to meet each client’s needs.For more than 25 years, J.P. Morgan has provided clients with customized solutionsto fit their unique needs. We believe that clients should have choices with respectto program design, parameters, collateral, loan distribution and oversight. Ourclients benefit from customized and comprehensive lending options and onestopaccess to a range of solutions, supported by the world-class expertise andexecution of our entire firm.jpmorgan.com/securitieslendingThe announcements above appear as a matter of record only. J.P. Morgan is the marketing name for JPMorgan Chase & Co. and its subsidiaries and affiliates worldwide.J.P. Morgan Securities LLC is a member of NYSE and SIPC. ©2012 JPMorgan Chase & Co. All rights reserved.

PanelDebateAsian securities lending panel debateAs the cream of the securities lending industry gather for the PASLA conference in Taiwan, we asksome of the region’s experts about the prospects for AsiaBen Wilkie, editorDavid RaccatHead of global markets, market &financing ServicesBNP Paribas Securities ServicesSimon TomlinsonHead of international equity tradingBNY MellonChristian RosslerSenior vice president, global securitiesfinancing, sales Asia PacificClearstream BankingAndrew McCardleHead of EquiLend AsiaEquiLendGiselle AwadSenior vice president, eSecLendingAsia PacificeSecLendingKirit BhatiaHead of technical sales, Asiaex-JapanJ.P. Morgan Worldwide Securities ServicesSunil DaswaniHead of international client relationsfor securities lendingNorthern TrustYin Yin NgHead of securities lending deskPhillip Securities Pte Ltd (Singapore)Francesco SquillaciotiSenior managing director regional businessdirector, APAC Securities FinanceState Street“Hope to see you in Taiwan”Justin LawsonPublisherSecurities Lending TimesSLT: How well has the Asian marketrecovered from the downturn?Christian Rossler: When it comes to the financialturmoil over the last three years, the Asianmarkets have certainly suffered less than othersand have generally coped adequately with thecrisis. The lessons learnt by the Asian marketsfrom the 1997 regional crisis – that is, developmentof local bond markets with increasedgovernment borrowing in local currency alliedwith long maturities and the generally prudentapproach taken with regard to structured creditproducts and asset-backed securities - havehelped Asian investors and markets cope withglobal fluctuations.Asian banks are currently under less pressurethan Western banks because of their relativelystrong capital positions. And while Europe andthe US are about to face a wave of regulation,16which is designed to strengthen capital and liquidityrequirements, Asia faces change for adifferent reason: the main goal for Asian marketdevelopment is to ensure that the anticipatedgrowth of Asian economies is based on a secureand stable foundation. It makes sense to ensurethis growing sector is built on a well-regulatedbase right from the early days as it is more painfulto undergo change when industry practicesare more established.www.securitieslendingtimes.com

PanelDebateThe international financial crisis had the effectof detracting attention away from classical interbanktriparty securities lending transactions inthe region while market participants were forcedto make a review of basic principles. Our experienceis that we see it’s the international playersin Asia who are still the early adopters.Sunil Daswani: Regulatory intervention hasnot, on the whole been favourable to recovery,specifically in markets such as Australia,where a short selling rule proved a disincentiveto investment, and South Korea, where a banon covered short selling hampered demand forthree months in late 2011.Borrowers have been compelled to adopt a morecost sensitive approach to their businesses,which has internalised a lot of demand. Coupledwith this trend, corporate deal activity remainssubdued, particularly in markets such as Japanwhich was negatively impacted in early 2011.Having said this, pockets of demand continue toexist in Asia and are likely to remain a priority forborrowers in the near future.In the emerging market space, Taiwan continuesto attract significant interest, given stronghedge fund demand, high spreads and compellingrevenue prospects. Hong Kong alsoemerged as a key market particularly during2011, where concerns over a slowing Chineseeconomy drove directional demand for sectorsexposed to this trend.David Raccat: The Asian market had not onlythe general market downturn to recover from,but also the short sale bans, short term reductionsin asset allocations to some emergingmarkets in the region from US and European investors,and higher than usual withdrawals fromlocal funds by Asian investors as they switchedto other asset classes such as cash.Raccat: Hong Konghas emerged to bethe main driver in theregion in the lastcalendar year. Asexpected, Taiwan wassecond. South Koreahas dropped awayThat said, these dynamics were not unique toAsia but as we all know Asia comprises sev-eral markets each of which has a unique dynamicand has evolved in a unique way sincethe downturn.From the borrower, or demand, perspectiveHong Kong has emerged to be the main driverin the region in the last calendar year. As expected,Taiwan was second. South Korea hasdropped away and the most recent reinstatementof the short sale ban has not helped. Japanhas continued to be Japan – stable, volumedriven and nothing unexpected.From the lender, or supply perspective securitieslending has returned to the agenda across Asia.Speaking for BNP Paribas our lending supplylevels are higher than pre-GFC, and we haveboth a strong pipeline of new clients and are beingasked for securities lending services acrossthe region. Some of the latter is exploratory –those who have not lent their securities beforeare comfortable that the sector is growing, is anacceptable market activity for institutional investorsand want to know what levels of revenuecould be generated from their assets. There is ahuge amount of pressure in the pension sectorat the moment in regards to performance andwhen discussing performance funds also reviewtheir operating costs. This is the traditionalsegue for a securities lending discussion and itis occurring across Asia today for us.18What is unique to the Asian region, and why itis the fast growing region for securities lendingactivity globally is that there is still ‘new’opportunity – new lending supply, new marketsor easing of access to existing marketsand an active corporate sector to drive intrinsicvalue opportunities.Yin Yin Ng: We have been seeing near termpositives for the equities markets. The rate ofcontractions in Asia have somewhat eased. Majormarkets seemed to be recovering. In general,most of our individual traders are shunningthe market for shorts and going on long for now.This could mean a temporarily quiet securitieslending market for us. On the positive side, theprice recovery will mean a better level for shortingin time to come.Andrew McCardle: The impact of the downturnhas taken longer to reach Asia in some respectsand is still being felt. We have seen interestwithin the region grow as people look to automatedsolutions for workflows that have beenvery manual for a number of years. There aremany local markets within Asia where our clientswould like EquiLend to assist in automatingservices that we provide today, and as has beenthe case historically. These automated solutionsbring efficiency and help to grow business betweencounterparts.www.securitieslendingtimes.com

PanelDebateby the global economy and does not operatein a bubble therefore they are susceptible andhave been impacted by issues arising from Europeor USSLT: As the annual PASLA conferencehits Taiwan, what is it about thisspecific market that makes it themost popular in Asia?Squillacioti: Taiwan is among the popular marketsin Asia. I think this is a combination of a fewfactors. On the one hand as the mix of activityin the market make Taiwanese securities attractiveand sought-after by our counterparties.From our perspective, it’s been a good marketfor our clients from a revenue standpoint whileoperating quite efficiently. And, more generally,it is encouraging that the exchange has beenengaging with the market. There continues tobe strong participation by the hedge fund communityin this market for various strategies,and demand for these main drivers remainsrobust and we see no reason for a slowdownat the moment. We see these trends continuingand that should continue to keep Taiwan apopular market.Francesco Squillacioti: In our experience, ithas not been a case of homogeneous recovery:some markets have recovered more quicklythan others. That said, there have been improvementsoverall and we feel generally optimisticabout how Asian markets will perform.Simon Tomlinson: The Asian market as awhole has weathered the downturn surprisinglywell. Japan’s economy has recovered betterthan most people would have thought possibleafter the devastating earthquake in the early partof 2011 and with 50 or so IPOs planned for 2012that compares favourably to the 31 we saw in2011. Hong Kong continues to be a significantrevenue generator with good short interest andhealthy spreads with property, construction andretail companies in demand. Has it fully recovered?The answer is clearly no but the headwindsand negative sentiment that are beingfaced in Europe and the US from both a regulatoryand public perspective are not as prominentin Asia. We predict the growth to continue, aidedby the continued expansion of lending inventoryin Taiwan and new markets such as Malaysiaand Indonesia.Kirit Bhatia: Asia has made a strong return tolending over the past two years. Since 2009, thelendable value of equities and on-loan balanceshave more than doubled. Taiwan, Thailand andSouth Korea have been some of the stand outmarkets in that recovery with some of the highestpercentage returns on lendable assets. Onthe fixed income side, Asian government bondsgrew tenfold with around US$30 billion of Asiangovernment bonds on loan – which representsjust under three per cent of global bonds on loan.Clearly there is scope for growth there when youcompare the region with the more mature USand European bond markets. Barring any majormarket shocks, we expect the positive momentumto continue into 2012 supported by a stillgrowing macro level environment and increasinglysophisticated regional capital market.Giselle Awad: Compared to the US and Europe,Asia is relatively bullish. Most of the majoreconomies are experiencing growth but higherinflation in the region has the potential to triggergovernment currency intervention or tightermonetary policy which could temper economicgrowth. Specifically, China’s shadow bankingcredit situation has worsened coupled with increasingGDP to debt ratios and inflation meansa loosening of monetary policy is unlikely. Whilethere are expectations that Chinese domesticdemand will continue to grow, reducing the region’sdependence on the global consumer, thereality is that Asia is still part of and influenced19Awad: China’sshadow bankingcredit situation hasworsened coupledwith increasing GDPto debt ratios andinflation means aloosening of monetarypolicy is unlikelyTomlinson: Taiwan is a market that is stillunder-supplied from an offshore lender’s perspectiveso spreads remain high and returns forclients that are willing to work with their lendingagents are significant. Onshore lenders’ stocktends to be callable for AGM/EGMs and also fordividends so lacks the stability borrowers arelooking for to maintain long term shorts. However,Taiwan is not just about shorting, It alsohas a very active convertible bond market whichgenerates arbitrage opportunities along with demandto borrow for the creation of ETFs. Clearlyas more lenders are able to navigate past theissues in this market and begin to participate,returns will start to come down but that appearsto be some way off yet.www.securitieslendingtimes.com

PanelDebateBhatia: As noted above, Taiwan has been akey growth market for securities lending in theregion, with market value of lendable assetsgrowing almost 500 per cent since 2009. It hasa deep and liquid market, robust capital infrastructureand sophisticated market participants.And whilst Taiwan equities only makes up asmall 0.3 per cent percentage of global lendableequities, the returns are many times highercompared to more mature equity markets. Overtime, this will level out, but for now Taiwan remainsa key market.Daswani: Taiwan’spopularity stemsfrom the compellingrevenue prospectsthat exist in themarketAwad: Demand outweighs supply for Taiwaneseassets. The recent attention on short sellerswhile the market index underperformed hashelped fuel lending opportunities in the marketas onshore lenders were less inclined to participate.Even with these hurdles there is a robuston-shore lending community with short sellingallowed by local and foreign institutions. Whileit is still a developing securities lending market,it is accessible. Lenders of offshore supply areeager to engage, but are deliberate in their duediligence of the intricacies of lending in this market.Currently, there is minimal offshore supplytherefore bringing that supply to market to meetthe demand can generate attractive returns forparticipants. Demand is focused on exports withtechnology, media and telecom stocks being themost attractive sectors.Rossler: Taiwan (amongst others) has an establishedpresence and has been relatively activein securities lending markets for a numberof years. Taiwan is a centralised securities lendingmarket which is, by nature, more transparentand more liquid than an over-the-counter(OTC) lending market. From a domestic securitieslending perspective, the ability to use USDas cash collateral as well as the TaiwaneseDollar for securities lending operations sinceAugust 2010 is a sign of the importance givenby local authorities to the development of thismarket. Taiwan also enjoys utilisation rates forsecurities available for domestic securities lendingprogrammes that are significantly above averagefor the region and which compare favourablyon a global level.Daswani: Taiwan’s popularity stems from thecompelling revenue prospects that exist in themarket, supplemented by two main factors.Firstly, demand remains robust from hedgefunds driven largely by directional trading interestsparticularly in the technology and solarsectors. There is also strong demand for ADRand GDR arbitrage. Secondly, there is an obviousshortage of supply in Taiwan as many lendersattempt to navigate the operational nuanceshindering their entry. These two factors havesustained high spreads for lenders and borrowersand will continue to do so in the near future.Raccat: Taiwan is at the top end of the list butit is not without its challenges and risks! Thereare considerable regulations to consider in themarket, namely per-stock limits on what can beshort sold, which can prevent shorts being executed;tick limits when shorting, again reducethe ability to short sell in the market. Both ofthese regulations are a consideration when borrowing.Demand is still high in Taiwan for long/short trading strategies in technology names,and convertible bonds arbitrage/hedging. Thecurrent high demand for names is not met bythe current supply in the market, so Taiwan continuesto be a focus for lenders and custodiansto take advantage of this upside potential fortheir underlying funds.McCardle: The simple answer would be revenuepotential.SLT: How important is China goingto be to the securities lending marketin the region?Daswani: China is undoubtedly an extremelylarge and valuable untapped source of revenuefor the industry, although there is no certainty asto when regulations will allow for offshore participantsto facilitate securities lending.However, recent progress has taken place inthe development of the onshore model. Followingthe launch of a pilot programme for securitieslending and margin trading with selectedonshore brokers, China adopted these as standardprogrammes in November last year includingthe enlargement of the target securitiesscope from 90 stocks to 278 stocks and sevenexchange traded funds.In addition, the Securities Association of Chinarevised two rules for margin trading and securitieslending, allowing securities companiesto apply for both margin trading and securitieslending licenses. It is also common for mostChinese clients with foreign securities to participatein securities lending programmes.20Ng: As China is beginning to open up its capitalmarkets and may have become the secondlargest economy in the world, we will see evengreater level of investments into China. This willmean greater need for hedging in hope of reducingequity market exposures. As such, theopening up of securities lending for China marketwill be important.Rossler: Given its size and continued influence– both economically and geopolitically - in theregion, China will remain firmly in the spotlight.China is an important economic driver for thisregion and beyond; the growth and developmentof the offshore renminbi (CNY) will contributesignificantly to this.Raccat: Very important – but as with manyactivities evolving in China its importance willbe dictated by the regulatory environmentand manner in which any change of regulationis introduced.The development to date has been impressive,but still has its challenges. In under two years ithas allowed activity to flow but the parametersrestrict the ability of offshore entities to freelyborrow and lend. For example all activity mustbe undertaken via a state-authorised securitiesfinance company as agent, and it excludesqualified foreign institutional investors many ofwhom are licensed to trade locally through theexchanges – but cannot borrow or lend securitiesdirectly with other investors as occurs internationally.China is clearly going to be a keymarket for the region, and the regulators are understandablytaking a measured approach whilstthey review the best way to open the market upfor additional activity and foreign investors.Rossler: Given itssize and continuedinfluence – both economicallyand geopolitically- in the region,China will remainfirmly in the spotlight.McCardle: China is a market that the world iswatching on a number of different levels andthis is no different for any firm involved in securitieslending. An initial trial of a securities lendingbusiness in China was deemed a success.It moved to a live status with the opening of themarket at more Chinese firms. If they can passwww.securitieslendingtimes.com

Seize new opportunities with ourSecurities Lending Program.Who’s helping you?With increased pressure on margins, institutional investors must seize every opportunity to enhance portfolio returns.At BNY Mellon, our experts will work with you to mobilize your idle assets through our suite of securities lending services.Working together, we’ll do the small and large things that help you find the path to success.bnymellon.com/assetservicingBNY Mellon is the corporate brand of The Bank of New York Mellon Corporation. Products and services are provided in various countries by subsidiaries, affiliates, and joint ventures ofThe Bank of New York Mellon Corporation, including The Bank of New York Mellon, and in some instances by third party providers. Each is authorized and regulated as required withineach jurisdiction. Products and services may be provided under various brand names, including BNY Mellon. This document and information contained herein is for general informationand reference purposes only and does not constitute legal, tax, accounting or other professional advice nor is it an offer or solicitation of securities or services or an endorsement thereofin any jurisdiction or in any circumstance that is otherwise unlawful or not authorized. ©2012 The Bank of New York Mellon Corporation. All rights reserved.

PanelDebatethe regulatory hurdles, it shows that this marketis starting to move forward. A number ofChinese firms are looking to open internationalsecurities lending desks outside of China. Thismarket will continue to grow and become ofeven greater interest to global securities lendingfirms over the coming year. However, the Chinesemarket allowing foreign firms to participateindependently of any Chinese collaboration in afully open market remains to be seen.Squillacioti: It is verydifficult to know whenan offshore marketwill be in place, weare keeping an eyeon developmentsin ChinaSquillacioti: There is quite a lot of interest inthis topic, and judging from this and from proxyactivity in H Shares, it is reasonable to assumethat there will be substantial interest when themarket is developed and open. Though it is verydifficult to know when an offshore market willbe in place, we are keeping an eye on developmentsin China, and look to prepare for thisdevelopment as much as possible.Bhatia: There is no doubt that China is goingto one day play a central role within the contextof a regional securities lending programme. Traditionallya major supplier of US and Europeanfixed income securities for securities lending,the 2008 financial crisis did spark a pullback,with Chinese lenders suspending their participationin programmes.However, as the world’s financial markets andthe global economic recovery stabilise in tandem,we are seeing Chinese lenders re-enteringthe securities lending market. One of the importantdrivers of this move back onto the playingfield, is the ongoing development of China’sQualified Domestic Institutional Investor (QDII)scheme, which will be a strong source for equitiesliquidity as QDII participants increasinglylook to securities lending programmes.Domestically, China is also making strong progressin integrating securities lending practicesinto the broader financial markets. The recentannouncement that it is planning to establisha centralised securities lending exchange is aAwad: Regulation varies from one country tothe next and it is important to understand thenuances of each. Asian markets have historipositiveindication of things to come, though weare watching the markets for more news on theexact timing.Tomlinson: As one of the BRIC countries Chinaof course will become increasingly important,however it remains restricted to onshore lenders/borrowerswith no sign of that changing inthe near term. As it stands right now and fromBNY Mellon’s perspective the other BRIC countriessuch as Brazil via the CBLC or Russia areeither already open to a form of securities lendingor working on solutions and offer more immediateopportunities.Awad: We have seen the influence of China inthe performance of markets such as Hong Kongand Taiwan where strong growth has led torobust lending markets. China will have an importantindirect impact (and in the longer term apotential direct impact) on lending as they movetowards more transparent and open stock markets.As a stand alone lending market, Chinahas significant potential however foreign participationin securities borrowing and lending isstill far off as lending is currently only conductedby local participants onshore under a pilot programme.China is taking steps towards a morerobust securities lending market. In 2010 it starteda government run pilot programme involving2225 brokers and covering 90 eligible stocks. In2011 the list of eligible stocks was expanded to278 and seven ETFs, however the 25 brokersare only able to lend securities from their ownfunds and holdings are not significant.SLT: What impact is the new globalregulatory environment having onthe market in Asia?Bhatia: As the world’s regulatory environmentcontinues to evolve, we’re remaining focusedon delivering value to our clients, who are inturn focusing on market fundamentals in termsof executing their strategic growth plans. As youcan see from the figures we have shared previously,the significant growth in securities lendingacross Asia is a clear indication that the marketcontinues to move in the face of regulatory flux.Regulatory change, the anticipation of regulatorychange and the need to adapt as and whenthings evolve has become almost business asusual – a constant that needs to built into regularpractices. That is not going to change in theforeseeable future.www.securitieslendingtimes.com

PanelDebatement systems which is why some institutionsand infrastructures are now looking to insourcethis function.Daswani: The impactof these regulationsremains largelyundefined currentlysince details of howthey will beimplemented areyet to be finalisedcally imposed specific securities lending rulesaimed at greater transparency. Regulators aregenerally supportive of the practice and oftenwork with the industry to create solutions.They have the advantage of already havingestablished securities lending policies and canwait and see what/how US/European regulatorschange theirs and then consider applyingwhere appropriate.Bhatia: The significantgrowth in securitieslending across Asia isa clear indication thatthe market continuesto move in the face ofregulatory fluxRossler: Basel II implementation is still ‘inprogress’ in Asia; some countries have implementednew regulations, for example, HongKong, while others such as China are still inthe course of implementation.Asian countries seem generally supportive ofBasel III implementation although many havenot made public commitments. However China,Japan and Singapore have all confirmed in oneway or another that they support Basel III.Financial institutions across the globe are facingthe additional burdens of increased collateralmanagement as required under the G20decisions taken in Pittsburgh in 2009. But researchcommissioned by Clearstream from Accenturerevealed that many banks are paying ahigh price for inefficient collateral managementwithin their institutions. Accenture studied anumber of international banks and found thatsome 10 to 15 per cent of available collateral isoften left unused because it cannot be consolidated.The cost of fragmented collateral wasestimated by Accenture at more than USD 5.27billion a year – but this estimate reflects thecurrent situation; the Basel III measures canonly increase this figure.The main problem identified in the report wasthat internal structure in global banking operationshas now become very complex and soprevents many institutions from having a singleview of their available collateral. All of the institutionswhich took part in the in-depth studyreported having inadequate collateral manage-23Daswani: The importance of the global regulatoryenvironment will remain a prominent securitieslending theme this year, with the roll-outanticipated of rules stemming from regulationssuch as Dodd-Frank, Basel III, and global shortselling rules. However, the impact of these regulationsremains largely undefined currently sincedetails of how they will be implemented are yetto be finalised in most cases.Northern Trust’s securities lending expertsare active participants in the discussions beinghad by industry associations with regulatorsaround the world, allowing us to providevaluable input to the various agencies responsiblefor drafting these new regulations. Ourinvolvement also puts us at the forefront ofregulatory and market changes with our abilityto influence and drive positive change ultimatelybenefitting our clients.Regulation in Asia for securities lending hasbeen restrictive in some cases and onerousin others and continues to be at the forefrontof conversation, particularly regardingemerging markets.Short selling rules imposed in 2011 constraineddemand and although lifted in South Korea fornon-financials in November 2011, these continueto be a threat amidst market volatility giventhe difficulties in hedging against it.Short selling reporting regimes such as thosein Australia (and soon-to-be in Hong Kong),whilst onerous on market participants, have notemerged as disincentives to invest and the consensusis that such transparency is beneficial,provided the information is accurate and protectiveof entity disclosure. There has not been anyspecific impact ahead of the roll-out of Basel IIIalthough it is perhaps premature to speculateat this stage.www.securitieslendingtimes.com

PanelDebateRaccat: As the majority of the working groupsand discussions are being chaired in Londonand Hong Kong these may assist in standardisingthe approach across some markets in Asia.That said, we have the impression that the localregulators across Asia feel that they haveappropriate levels of regulation in place andthis was evidenced by the robustness of Asianmarkets during the global financial crisis, so wemay have some recommendations adopted butnot others, as regulators continue to adopt ‘bestpractice’ but avoid any potentially negative impactsto their markets.Tomlinson: Asiaseems to be watchingwith interest as to howthe western marketsimplement the newrules and the effectthey will have ontheir marketsMcCardle: At present it does not seem fullyclear as to how the ongoing discussions of regulatoryor even legal changes that may come intoeffect this year will impact the global markets,including Asia. Regulatory changes are somethingthat have been a concern for many clientsover the past years in Asia - but regulators indifferent countries have decided to take differenttacks to try to insulate their economies frommany of the perceived downsides - to a thrivingsecurities lending market.Squillacioti: This is another area that many willbe keeping an eye on in the coming months. Forthe most part, regulatory reform has been relativelypositive in the Asian markets. As with thequestion of market improvement above, from aregulatory standpoint as well, it’s not really a homogeneousmarket and it’s to be expected thatyou would see differing developments in the variousmarkets. Asia has a mix of both developedsecurities lending markets and developing securitieslending markets. There are some marketsthat have been established for a few years makingcontinual tweaks and improvements. Thereare markets that are just beginning to exploreimplementing securities lending, such as Chinaand other markets that are reviewing changes toexisting models to make them accessible to offshoreparticipants. Market structures such as inTaiwan offer regulators and the exchange a highdegree of inherent transparency into the market.This probably serves as a way to mitigate theneed for the imposition of many other regulationsthat are seen in other markets. Hong Kongis a good example of a market that has beenan extremely favourable one from a regulatorystandpoint over the past several years, and webelieve serves as a model for other markets inthe region. All in all, directionally, the variousmarkets and regulators’ approach to securitieslending seems relatively positive.Tomlinson: Asia has always had various formsof market dependant regulation such as HongKong with the pre hold requirement (SLHK),which allowed it to perform favourably duringthe height of the credit crisis and avoid havingto enact any short selling bans. With the globalchanges taking place, Asia seems to be watchingwith interest as to how the western marketsimplement the new rules and the effect they willhave on their markets. Obviously the introductionof Basel III with its new capital, liquidityand leverage requirements will affect financialinstitutions everywhere and we expect to see acontinuation of the theme we are seeing in theUS and Europe to move towards equities andother types of securities as collateral and termup business where possible.SLT: What emerging markets aremaking significant moves forwardin terms of SBL?Rossler: Asia is one of the key growth regionsin the global securities lending market and, currently,Asian equities markets represent a significantshare of the total equities that are onloan. The utilisation rate is also higher on Asianequities than the rest of the equities markets.In terms of securities lending fees, some of thehighest fees are paid on Asian equities leadingto greater revenues for this activity.In Asia, local currency bond markets are underdevelopedcompared to their domestic equitymarkets. However, there are signs that this situationis beginning to change and many Asiancountries are making significant strides in developingtheir bond markets. As I mentioned earlier,the fact that local currency bond markets havedeepened significantly since the 1997 regionalcrisis, means that emerging Asian markets havebeen able to deal more effectively with the internationalcrisis this time around. Therefore, wewould also expect local bond markets acrossAsia to continue to develop and issuance indomestic currencies to increase, with a greaterdepth of domestic investment.24Daswani: Apart from Taiwan maintaining its positionas the priority emerging market for mostlenders in the region, recent changes in Malaysiaare likely to make it easier for offshore participantsto engage in this market.Contrary to an initial ruling, regulation waspassed in January 2012 to allow for lenders torecall loaned securities after selling those securitiesunder a securities lending transaction,subject to various conditions. This is a significantstep forward and participants are expectedto pursue actively lending in Malaysia, albeit thatuncertainty exists around revenue prospects atthis stage.Raccat: China, which if you combine the marketcapitalisation of the Shanghai and ShenzhenExchanges together are roughly the samesize as the London Stock Exchange. Howeverwe also continue to watch India, which is still asynthetic market, and would like to see somematerial developments given the growth of thislocal exchange which is now the 12th biggestexchange (by market capitalisation) globally.McCardle: In Asia the emerging markets that areof keen interest seem to be India and China.Squillacioti: Malaysia enhancing its offshoremodel is certainly evidence of making stridesas an ‘emerging’ market for securities lending.It presents some exciting opportunities. We alsocontinue to look at markets such as Indonesia’soffshore market, the Philippines, and Vietnam,which also currently seems to be exploring thepotential of SBL.Malaysia looks to be the next market that BNYMellon will be focusing on although Indonesiaalso seems to be making progress. We shouldnot forget India, which although it is currentlyvery restrictive, is definitely one we have our eyeon should the dialogue that is being had with theSEBI lead to any material developments.Rossler: Theutilisation rateis also higheron Asian equitiesthan the restof the equitiesmarketsBhatia: In short, China. As noted above, Chinais making strides in developing their domesticwww.securitieslendingtimes.com

PanelDebatesecurities lending platform and we expect it tobe an important market in years to come.Awad: Taiwan: When securities lending wasfirst introduced it was limited to on-shore participants,however the regulatory authoritiesmoved to open lending to offshore lenders. Thisbenefited the Taiwanese marketplace by injectinga new source of liquidity.South Korea: Korea’s ban on short selling duringthe later part of 2011 hindered activity in themarket. Following the lift in Nov 2011, demandhas returned particularly for exclusive supply.Malaysia: Since 2007, Malaysia allowed lendingthrough a Bursa Clearing, acting as a centrallending agency. Since 2009 it has also allowedSBL NT (securities lending and borrowing negotiatedtransaction) model where it providesapproved participants the ability to agree to SBLtransactions on an over-the-counter basis andthen report such transactions to Bursa Malaysiavia on-shore representatives.India: The regulatory regime has significantbarriers to entry but some rules have started torelax eg, loans are now allowed for one year increasedfrom seven days.SLT: Is the subject of CCPs causingmuch debate in Asia? What areyour views?Raccat: We field lots of questions regardingCCPs from our lending clients and the keyquestions are ‘Will these add value in terms oftransparency’ and ‘Will these reduce risk as withCCP proposals for other activity types such asOTC Derivatives’?Ng: The CCP model at a multiple assets / derivativeslevel is definitely offering greater operationalefficiency as well as central counterpartyrisk. However, it has always been a debate ofwhether CCP increases or reduces counterpartyrisk. We have seen that even the ‘best’ of financialinstitutions can fail. As such, the question inmind would be who is in the best position to takeon the role as a CCP to ensure the elimination ofsuch counterparty risk.Rossler: The introduction of a CCP forces a reassessmentof the role of the agent lender in interfacingbetween the lender and the borrower.This sounds like bad news for agent lenders butClearstream believes its CCP will bolster ratherthan undermine its relationship with lenders andborrowers. The advantages of a CCP to securitieslending are clear and the lenders gainthe additional reassurance of the trades beingBhatia: China moving towards an active securitieslending market will be a theme. Regulaintermediatedby a CCP on top of the protectionalready afforded to them by the collateraladvanced and the haircuts levied.McCardle: The topics of CCP seems to havebeen a heavily debated one for many years nowand in some Asian markets has been a realityfor some time. It does not seem to be a topicas widely discussed as in Europe over the pasttwo years.In speaking to the EquiLend client base throughoutAsia and the Pacific, it seems that for thosemarkets where there is a CCP in place it worksbut there is no desire or requests for those modelsto be replicated in the other Asian markets.When looking at the number of firms seekingto launch or run a CCP globally, there are nolarge projects to provide a route to markets viaa CCP where it is not mandated. In Europe andAmerica we have seen a number of CCPs beingestablished or looking to launch recently butnone seem to have taken off as predicted twoyears ago, highlighted by the recent closure ofSecFinex in Europe.Ng: it hasalways been adebate of whetherCCP increases orreduces counterpartyrisk. We have seenthat even the ‘best’ offinancial institutionscan failSquillacioti: From our perspective, it has notcaused that much debate in Asia as yet. Ourview continues to be that the various marketswill approach securities lending in a way thatfits into their overall regulatory context, and ina way that allows for the development and expansionof a lending market, which is consistentwith their level of comfort. We continue to advocate,either directly or through industry bodies,such as PASLA that to the extent possible withinthese parameters markets are allowed to operateas openly as possible so as to allow for andfoster significant participation.Tomlinson: At BNY Mellon we are open mindedwith regards to CCPs and their place withinsecurities lending. As it stands right now we areyet to see a viable model and if we talk specificallyabout Asia, there is less discussion underway,with no real push to go down this route.In an age where costs are under the spotlightand risk reward is a major focus for our clientsabsorbing the additional costs that would likelycome from using a CCP does not seem to becurrently justifiable.McCardle: we haveseen a number of CCPsbeing established orlooking to launchrecently but noneseem to havetaken offBhatia: As with regulation, I think the debate,at least for CCPs for derivatives is over. We seemany countries making strides towards the implementationof CCPs, particularly for derivativestrading. There is analysis which suggests thesemoves will generate large demand for high gradecollateral to post to CCPs and securities lendingcould be one way for institutions to generate thecollateral. It’s an interesting space and could be apositive force for generating lending demand.Awad: Many Asian countries (Malaysia, Taiwan,Korea, India) require securities lending transactionsto take place through a CCP so it is not anew concept in the region.SLT: What are the key trends youexpect to see in the coming year?Tomlinson: Companies looking to raise capitalis a definite. As I indicated before there are asmany as 50 IPOs likely to take place in Japanalone for 2012, the highest since pre creditcrisis and the outlook for M&A is cautiouslyoptimistic although there are concerns thatthe global economic weakness may have animpact. On the hedge fund side it is widely believedthat inflows will be higher in 2012 as pensionfunds and retail investors look to increasetheir allocations. If we are focusing in purelyon securities lending borrowers will continue toseek to push costs down and look to go furtherdown the collateral curve. Equity collateralshould continue to become more prevalent andit will be key for lenders to have a solid suite ofcollateral options on offer whilst maintaining astrong stance on risk management.25 www.securitieslendingtimes.com

PanelDebatetory flux will also be a constant but one that themarket will absorb as an ever present reality. Ata macro level, economic turbulence, particularlyin Europe will continue to cast a shadow andcould throw up unexpected market disruptions.Overall though, we expect the return to lendingreturn to continue in 2012 with greater focus onthe core value of the lending transaction andrisk management.Awad: We expect the industry evolution to continue,with beneficial owners placing increasedfocus on multiple providers, benchmarkingand performance attribution. While the currentregulatory landscape has negatively impacteddemand, we believe that as greater clarity isobtained and finalised, activity should increase.We anticipate increased demand from borrowersaround SCRIP/DRP related opportunitieswithin Asia as well as Japanese dividend tradesas participants seek out additional revenue opportunities.Emerging markets will continue tobe a focus for the industry as they have growingeconomies, a large base of assets to invest,multiple constituents, good liquidity, and passivelyheld investments.Rossler: Regulatory pressure and new liquidityguidelines are forcing counterparties to collateralisetransactions to an even greater degreethan before. Effective collateral mobilisationunderpins all critical liquidity management butmany institutions do not have systems that cancope with the complexity of today’s bankingarchitecture. This has prompted a growing interestin white-labelled solutions and franchisingarrangements in collateral management.For example, since July 2011 Clearstream haslaunched such a solution in Brazil by providingcollateral management to the local CSD, Cetip,which allows Cetip’s customers to comply withlocal legislation as their underlying assets remainin Brazil. Additionally, since August 2011,Clearstream has entered into exclusive talksabout collateral management cooperation forAustralia. This new product enables customers– central banks and infrastructures - tooptimise the use of collateral, that is makingsure the correct quality of collateral is allocatedat the right place and at the right moment withmaximum efficiency.Awad: we believethat as greaterclarity is obtainedand finalised, activityshould increaseThe new regulations are changing the landscapeglobally and Clearstream is fortunate tobe well-placed as our collateral managementand securities lending expertise is becomingincreasingly well-known in Asia. This regionis a very important growth area for us and weare continuing to focus heavily on the evolvingneeds of our Asian clients. We anticipate thatAsia will make an increasing contribution to ourrevenue stream from its current level of approximately20 per cent.It is likely that the demand for cross-bordertransactions will increase in Asia in line withother markets around the world. This is why wehave extended our settlement processing windowto cover the Asia-Pacific business day sothat our customers can now access collateralmanagement services around the clock. Tripartycollateral management services are available toour customers 21/24 hours a day and are supportedby our operations in the region. The trendfor more globalised markets means customersneed global solutions.Daswani: Our expectation is that markets willremain volatile while global macro events continueto dominate the headlines and as such,prevailing uncertainty is likely to constrain borrowerdemand as hedge funds remain cautiousand risk averse.Furthermore, an expectation exists that borrowerswill continue to prioritise the efficient use oftheir balance sheets which will lead to a desirefor greater collateral flexibility from lenders, aswell as a continued theme of inventory internalisationwhere possible. Lenders will continue tomaintain an aggressive stance on rerates giventhe lower levels of general collateral availableand weaker reinvestment earnings. Lenders willalso continue to actively pursue new markets totap new revenue streams, particularly those thatare emerging.Raccat: For borrowers, collateral – what ispledged, how it is pledged, substitution andease of settlement, reporting & transparency.Collateral flexibility seems to be becomingmore and more of a discussion topic across themarket. As desks strive to both focus on marginsevery basis point has become importantas borrowers strive to maximise their in-house– if any – inventory.For lenders, transparency, risk management andperformance equals comfort. Lenders are moreaware of their securities lending activity todayand as lenders realise the potential revenue,risk mitigations and how to monitor their lendingactivity, the true dynamics and role of short sellingin the markets - we expect more and morebeneficial owners to become comfortable withsecurities lending and some of the ‘discomfort’around the topic is disappearing. SLTwww.mxcs.co.uk | contact@mxcs.co.ukMXConsultingDelivering regulatory solutions to clients within Agent Lending,Custodial and Principal Securities Financing programmes.A business & IT consultancydedicated to the SecuritiesFinancing IndustryPositive Change,Efficiently Delivered26www.securitieslendingtimes.com

800-677-7621www.rmahq.org6–8 March 2012 | W Taipei | Taipei, TaiwanCo-sponsored by the Pan Asia Securities Lending Association (H.K.) and the Risk Management Association (USA), the firstindustry-wide co-sponsored conference in Asia developed by securities lending and borrowing professionals for securitieslending and borrowing professionals.The business program will include discussions on Strategist, BNY Mellon Asset Management and Author of “All About Hedge Funds: the popular hedge fund strategies (Leverage, short selling, and hedging), how hedge bond portfolio and the legal, regulatory, and tax issues.For more information about the conference, registration, room reservations, Conference Co-ChairsKirtes BhartiDirectorCredit SuisseHong KongJason StrofsManaging DirectorBlackrockSan Francisco

DataAnalysisBeneath the surfaceThere’s more to securities lending than meets the eye, says SunGard’sDavid LewisMARKET PERSPECTIVEIf there is one subject that permeates every securitieslending forum, it is the need to educateevery stakeholder who takes an interest or evenparticipates in our part of the wider financialmarkets. Misinformation and incorrect assumptionsmake it all too easy to portray securitieslending as a “shadow banking” bogeyman stalkingthe honest, downtrodden investor.As an agent lender at the time of the Lehmandefault, I myself experienced the sharp end ofsuch negative sentiment, from being physicallyand metaphorically poked in the chest to beingintroduced to a pension fund’s investment committee,by its own chairman, as a “robber anda thief”!A great deal of this anti-lending feeling hascome from the linkage many have made betweensecurities lending and short selling. Butsecurities lending is not the same as short interest.In fact, it does the industry a disserviceby ignoring the other significant reasons thatborrowers borrow and lenders lend. It does nogood for the markets either, because it risksoverstating negative sentiment.It cannot be disputed, of course, that short sellingis a significant driver of borrowing and contributesto the balances we see out on loan. Butthat is only a part of the story. Other motivationsto borrow include:•••••Market making, which accounts for a significantportion of the overall market activity– without lending and borrowing, brokerscould not access the kind of liquidityrequired to keep spreads down and themarket functioning with increased settlementcertaintyFails management – borrowing to cover forwhen things do go wrongFinancing – the lending of assets againstcash to reduce funding costs to enhancea funds returnsYield enhancement – transitions of shareownership for tax efficiencyCollateral management –an increasinglyimportant part of the market demand profileOn most exchanges, there is no requirementfor borrowers to provide a reason for their decisionto borrow a security. As a result, there isno systematic way to accurately determine howmuch of any loan balances are attributable towhat purpose. Moreover, distilling short interestfrom the securities lending data will vary fromsecurity to security. For example, it is relativelyeasy to correlate short interest and securitieslending for a volatile share in an oil explorationcompany which does not typically pay dividendsand is unlikely to show up on an acceptable collateralschedule. It’s much more difficult to dothe same for a highly liquid blue chip stock or agovernment bond. As such, there is no formulathat can be applied to every security.Take, for example, the indexed on-loan balancesof Total SA (FR0000120271) and DragonOil (IE0000590798). Total is almost exclusivelya dividend or yield enhancement security, whilstDragon Oil displays the level of loan volatilitythat might be associated with a typically volatileshare price – ie, attracting significant directionalinterest. The distinctive peaks of borrowing activityover the dividend dates must not be confusedwith short interest for Total SA (dividendrecord dates are 18th May, 14th September and14th December 2011).The increasing attention being paid to collateralmanagement is also confusing the analysis ofdemand and supply. It is said that there will bean increase in demand for “quality collateral” asbanks need to fund paper at a time when highquality collateral is getting scarce. These tradescannot easily be separated as a borrowing motivation,but clearly rising securities lending doesnot equate to rising short interest. Organisationsmay be lending large quantities of general collateral(GC) stock against cash and then placingthat cash back with the same borrower in arepo transaction against lower quality corporatebonds and other non-cash assets. Termed Repofor GC or Ratio Trade, the repo tends to be at alower value than the underlying GC loan.For European funds, yield enhancement makesup a very significant proportion of the annualreturns in their lending programmes; some sayas much as 70 per cent of the year’s revenuesare compressed into the all-important EuropeanDividend Season. Whilst this is not an activitythat some wish to publicise for fear of raisingthe ire of regulators, popular press or evenclients, it is not the social pariah of short selling.The graph below shows the clear contrastbetween the European markets, which are predominantlydividend season driven (note theApril and May peaks in borrowing costs), andthe relatively consistent activity levels both inAsia and the US.The misinformation about securities lending isalso reflected in political activity. Greece hasrecently extended its ban on the short sellingof certain securities on the Athens StockExchange, and similar bans remain in placein France, Italy, Spain and Belgium. [Editor’snote: this article was written before the banswere lifted]Yet the academic evidence continues to buildagainst such bans. Research shows that theyactually harm the very investors that the regulatorsare trying to protect. A 2009 Federal Bank ofNew York paper indicated that the drop in liquidityduring a 14-day ban in short selling of some995 US securities widened spreads in the equityand options market and added around $1bn incosts. Short selling bans drove away lendersand effectively removed the oil which lubricatesthe market. Widening spreads are a result of thefriction introduced by the loss of liquidity createdby securities lending.Even before the Fed paper was published, thenchairmanof the SEC Christopher Cox describedthe ban as a regret: “I believe on balance thecommission would not do it again... The costsappear to outweigh the benefits”.It is incumbent on the liquidity providers to helpregulators understand the benefits that securitieslending brings to the market and its investorsas well as the diversity of reasons to engagein this activity. Breaking the assumptionthat securities lending balances are the sameas short interest is a vital step, but it’s only oneon a long road to bringing securities lending outof the shadows. SLTDavid LewisSenior vice presidentSunGard Astec Analytics28www.securitieslendingtimes.com

MikeFrazierHead in the cloudTullip Tree’s Mike Frazier explains how the next generation of securitieslending software has been created to support a changing marketBEN WILKIE REPORTSSLT: How do you see the securitieslending market at this time?Mike Frazier: At this time, the market has consolidated,there is far more globalisation in theindustry. An increased risk awareness has madeinvestors wary and investments have declined.But with that said, we’re hopeful that we havereached a stable level in the markets where wesee an upward progression.There has been a lot of uncertainty in the marketsover the past couple of years, which means theindustry will grow more slowly than it has in thepast and will have fewer participants - it remainsto be seen if those who have left will return.I think the growth will follow improvements in theeurozone and other major markets. Eventually,rates will start to come back up, they can’t staywhere they are forever! Investors have beenon the sidelines for so long. But fundamentally,things have changed.SLT: What is the reasoning behindthe launch of the new business inthe current climate?Frazier: The current climate is forcing somecompanies to rethink and retool their businessmodel and there is a need to meet the needs ofthose companies.SLT: What can Tullip Tree bring to thesecurities lending market that will differentiatethe firm from competitors?Frazier: We have a competitive pricing advantagethrough the economies of scale from thecloud computing platform.We provide multiple solutions with enhancedfunctionality that are suitable for each individualclient. With our products, it doesn’t matter ifyou’re a big or small firm, you can still competein this market. The service allows smaller firmsto take advantage of the software available tolarger firms, software that was previously at aprice point unfavorable for them - they can nowgo out into the market and compete.Lastly, the product offering is global in nature.SLT: With all the technologicalchanges in the industry, is it easierfor a new operation to offer a highquality service to customers, ratherthan an established business thathas to change many of its legacysystems and practices?Frazier: This is a tough question and there’s nota straightforward answer. Firms that have neverreally focused on their technology in the past29are at a disadvantage, because you have tohave the right technology to be competitive. Soif your firm has consistently developed its technology,it will be able to compete at the samelevel as newer operations.Budgeting for technology costs is difficult forany organisation, which is why we have decidedto offer a modular system that can be phasedin. And because it’s cloud based, it reduces thecosts. And when you take an established businessthat has legacy systems and practices,you can’t change it overnight. But you can takea phased approach and move away from thelegacy systems one by one.SLT: How about the regulatory side?How much is regulation changingthe industry?Frazier: The regulatory changes in the industryare requiring companies to adapt much quickerthan in the past to meet the needs of the marketconditions. Technology is essential for companiesto make the necessary changes needed ina timely manner on the regulatory side.SLT: You’re operating on a cloudbasedplatform. What advantagesdoes this bring?Frazier: First advantage is the up-front reductionin capital expenses that companies havewww.securitieslendingtimes.com

MikeFrazierendured in the past from buying dedicated hardwareand software.Second advantage is the time to market; withour solutions it is simply creating a dedicatedenvironment for your company in the cloud. Forexample, with the global inventory managementmodule, we create the environment for the clientand connect their inventory feeds throughan API. The client can then start using the moduleto document locates that will in turn producereports for compliance and management.Another advantage with cloud computing youare able to free up valuable IT resources frommaintaining hardware and software directly relatedto the product. These IT resources cannow concentrate on higher priorities within thecompany - an example of an indirect cost savingsthat impact the bottom line.SLT: Are there any security concerns?Frazier: Security is a key factor of ours, it alwayshas been and it always will be. Over the last fiveyears, though, security within cloud computinghas developed so that it now simulates the securityfeatures that users have come accustomed towithin their company’s LANs and WANs.SLT: Can you tell me a little aboutthe securities lending team youhave at Tullip Tree?Frazier: We have a pretty talented group withyears of experience in the financial industryfocusing on operations, execution, trading andtechnology. I’ve worked in the industry for over12 years, on the operation and technologysides of the house.SLT: Where do you expect your clientsto come from? Are your teambringing them along from their previousroles, are you getting firmsthat haven’t historically dabbled insecurities lending, or are you gettingexperienced clients who areconfident about running their businessrelatively independently?Frazier: This product can be used by both smallerand more established firms and we’re marketingto all participants in the industry. However, itdoes depend on the overall market. If we had asudden upturn in the market, firms might be lesslikely to change and keep with the status quo.But in the current climate, firms are looking forefficiency and looking to improve their processesfor when the market does turn around.SLT: How do you see the next 12-18months developing?Frazier: No question, we’re experiencing uncertaintywithin the securities lending market. Low30levels will remain until the euro markets sortthemselves out and rates rebound. We’ll seesome companies looking to invest in the futureby cutting costs and positioning themselvesfor growth.For us, we’re going to concentrate on thesecurities lending industry and provide customerswith alternative solutions to meettheir needs. SLTMike FrazierManaging partnerTullip Tree Advisorswww.securitieslendingtimes.com

“SunGard’s scalabletechnology and decadesof expertise help us growour business withoutsystem or cost constraintsand provide betterservice to our clients”Keith Babbitt,managing director and head ofglobal securities finance at KnightSECURITIES FINANCESunGard – our trusted advisor for securitiesfinance solutionsKnight relies on SunGard’s securities finance solutions to manage its domesticand international securities lending and repo business through Knight Execution& Clearing Services LLC.From trade initiation through to final return, SunGard provides a comprehensivesuite of securities finance and collateral management solutions.More than 150 customers in 150 countries trust SunGard to manage their securitiesfinance operations.Find out more. Visit www.sungard.com/securitiesfinance.©2011 SunGard.Trademark Information: SunGard and the SunGard logo are trademarks or registered trademarks of SunGard Data Systems Inc. or itssubsidiaries in the U.S. and other countries. All other trade names are trademarks or registered trademarks of their respective holders.

PeopleMovesIndustry appointmentsKirtes Bharti, director, equities and prime servicesat Credit Suisse, has left the bank accordingto sources.Bharti, who is also chairman of the PASLA ExecutiveCommittee is rumoured to be moving to ahedge fund. Credit Suisse declined to comment.Penson’s board of directors has announced theappointment of Robert Basso as independentdirector. He is also appointed as as a memberof two committees - Audit and Nominating andCorporate Governance.In other people moves, James Dyer has resignedfrom the Penson board.HazelTree has appointed Sandeep Rawal aschief technology officer (CTO). He replacesMatt Johnson, who is taking on consulting dutiesfor HazelTree at a hedge fund, which isalso the company’s tenth licensed client.Rawal most recently served as CTO of Fir TreePartners, where AUM grew to more than $7 billionduring his tenure. He brings over 20 yearsof knowledge and experience from Moore CapitalManagement and Maverick Capital in New York.Pasquale Cestaro and Bruce Turner have beennamed co-chief executive officers of Quadriservand members of the firm’s board of directors.Quadriserv operates AQS, a central counterparty-basedmarket that offers automated securitieslending trading in over 5,000 underlyingequity, ETF and ADR products.Cestaro, a 30-year veteran of the equity financeindustry, was previously Quadriserv’s vicechairman. Turner, who oversaw the launch ofthe AQS and AQS Direct platforms, was mostrecently president and chief operating officer.Thomas Perna will continue as chairman.“The combination of Pat, who brings his experiencein working with the biggest players in the securitieslending industry, and Bruce, who has ledsecurities trading, technology and market structureinitiatives for brokerages and exchanges fortwo decades, will further enhance our capabilitiesin meeting the needs of clients,” Perna said.“As liquidity and order flow continue to expandon the AQS platform, our model becomes increasinglycompelling for the industry’s majorparticipants,” Cestaro said. “I look forward tocollaborating even more closely with Bruce asQuadriserv continues exploring ways to providecentral counterparty-based value to new clientsand enhanced services for current customers.”GlobeOp has appointed Tim Ridley to its CaymanIslands subsidiary board. Ridley, the formerchairman of the Cayman Island MonetaryAuthority (CIMA) and a former senior partnerof Maples and Calder, was appointed followingthe recent resignation of Gary Linford.Ridley served as CIMA chairman from 2004-2008, having been a member since 2002. He is afrequent speaker and writer on financial servicesand regulatory themes. Ridley has also served asan editorial board member for several leading industryand legal publications. He currently servesas a director of various private companies.“Demand for greater hedge fund transparencyand governance is increasing,” said VernonBarback, GlobeOp president and COO. “TimRidley’s legal, financial and regulatory expertisewill be a benefit to GlobeOp and its clients. Welook forward to his contributions as we focuson independent valuation, regulatory and boardreporting. I would also like to thank Gary Linfordfor his contributions to GlobeOp - particularlyrelated to Cayman regulatory updates - sincehis appointment to the board in 2008.”The announcement comes as private equityfirm, TPG Capital, agreed to buy GlobeOp for£508 million. Though GlobeOp managementhas urged shareholders to approve the sale,the Financial Times reports that rival hedgefund administrator SS&C Technologies is settingthe stage for a bidding battle.Robert Chiuch has been appointed globalhead of equity finance at BNY Mellon, whileSLTSECURITIESLENDINGTIMESEditor: Ben Wilkieeditor@securitieslendingtimes.comTel: +44 (0)20 3006 2710Journalist: Anna Reitmanannareitman@securitieslendingtimes.comTel: +44 (0) 20 3006 2888Marketing director: Steven Laffertydesign@securitieslendingtimes.comTel: +44 (0)784 3811240Publisher: Justin Lawsonjustinlawson@securitieslendingtimes.comTel: +44 (0)20 8249 2615Office fax: +44 (0)20 8711 5985Published by Black Knight Media Ltd16 Bromley RoadBeckenhamKent, BR3 5JEUKCompany reg: 0719464Copyright C 2012 Black Knight Media Ltd.All rights reserved.Rob Coxon is no longer involved in securitieslending.Chiuch, who was previously managing directorin the securities lending team, will also have responsibilityfor equity finance. He will report toJames Slater, global head of securities lending.Coxon was managing director and head of internationalsecurities lending at BNY Mellon, responsiblefor the EMEA securities lending businessfor the bank. He joined BNY Mellon in 1997as a securities lending trader.His next role has not yet been made public.Experts in Derivatives, Financing and PrimeTechnology | Front Office | Operations | Advisory and Interim | Executive Search | Contingency RecruitmentWe’d like to demonstrate how we can offer you a betterexperience so please talk to one of our team on +44 207 099 5430or info@equitylinked.co.uk.32www.securitieslendingtimes.comEquityLinkedStrip.indd 1 17/2/12 08:54:32