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IHS Markit Securities Finance utilization and lending fee
Global equity utilization increased sharply in March, however as
noted in our
Q1 revenue snapshot, that uplift came off the lowest level of
utilization on record observed on January 13th, 2020. The hope that
higher utilization would persist and drive greater returns to
equity lendable assets was met with some resistance, with
utilization declining throughout April such that the average
utilization for the month was a minor decline YoY. The average
global equity fee spread declined YoY for April, resulting
2.78bps return to lendable for all global
equities, a -14.4% YoY decline. To add a common
understanding of those returns we've broken out by the industry
standard MSCI equity indices, with highlights below.
The MSCI World Index returned 1.3bps to 2.3bps over the
12m ending April 2020, with US contributing 29% of the
total revenue.
The MSCI World April return to lendable failed to
improve on the March results, the YTD monthly peak,
however the April return was greater than January or February.
Similar to MSCI World, the MSCI USA index return to lendable
declined relative to March, however remained elevated compared with
January and February, with 0.5bps to 0.8bps return to lendable in
April.
The MSCI Emerging Markets Index produced the highest securities
lending return in April with a range of 5.2 bps to 10.2 bps, more
than 78% contributed by special stocks, however EM returns
have declined YoY.
All six indices showed a lower level of securities lending
return for Q1 2020 compared to Q1 2019, however MSCI USA
& MSCI Japan both had a YoY increase in April return to
lendable.
Media & Entertainment was the top performing sector in the
MSCI World index for April 2020, contributing 14% of securities
lending revenue. It was also the top performing sector in MSCI USA
where it contributed around 45% of the securities lending revenue
for the month.
Short term peaks in returns for the MSCI World and MSCI USA
indices relate to exchange offers, which generate significant
revenues for shareholders who agree to forgo the offer to lend
shares.
The April reports for each index are available via links below.
Historical reports along with other reference materials for the IHS
Markit Securities Finance product available here.
Posted 14 May 2020 by Sam Pierson, Director, Securities Finance, IHS Markit
IHS Markit provides industry-leading data, software and technology platforms and managed services to tackle some of the most difficult challenges in financial markets. We help our customers better understand complicated markets, reduce risk, operate more efficiently and comply with financial regulation.
