Finding Profits in the Back Office
As my colleague Tim Murray noted in his November 2012 article titled "Eastern Promise", the securities lending market took a major hit in the US and Europe with the financial crisis in 2008. But it is crawling its way back and is even being used as a key for entry into the Asia-Pacific region.
Securities (or stock) lending has traditionally taken place almost exclusively in the back office─though that is changing─and as often happens to back-office processes, it doesn't see the investment that front and middle office platforms and tools receive.
But as firms are looking to make better use of their IT budgets and find new ways to cut expenses while becoming more efficient─the current axiom of the entire industry─improving the back office and making it something more than a cost center to an area that actually produces returns is an enticing idea.
I recently spoke with Marshall Saffer, chief operating officer of MIK Fund Solutions, and he said that firms can benefit from improved spreads if the rate structures between lenders are arbitraged and optimized in real-time. This is more than a strategy fix; there are real IT implications involved.
"Ben Franklin once said, ‘A penny saved is a penny earned.' Well that aphorism, when applied to the stock lending equation, we move beyond passive thrift to actually deploying the back office as an active mechanism to increase returns. So this way the back office becomes a generator for ROI," he says.
What's required is a robust equity finance engine that allows firms to see financing data across brokers, regions, asset types, portfolio managers and traders. It also means automating the recording and tracking of stock loan locates and pre-borrows, which would also allow for the ability to find lower borrow rates. It will provide detailed reporting, trend charting, alerts and other tangible measures to assist in day-to-day operations.
There's obviously a cost associated with an overhaul of this scale. But it's also hard to ignore the potential opportunity to find returns out of the back office.
Do you know of additional ways to improve securities lending? Or ways to make the back office profitable? Send me an email to anthony.malakian@incisivemedia.com or call me at 646-490-3973.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Data Management
Hub to lay off 20% of staff, sources say
Hub’s CEO says this is simply a case of a startup trying to stay nimble and efficient; others say it points to deeper issues.
TS Imagine integrates LTX’s pre-trade analytics tool
Users of the fixed-income EMS will now have access to LTX’s Liquidity Cloud tool, which provides a pre-trade score for the likelihood of trading success.
After contentious Opra upgrades, vendors brace for a faster future
Upgrades to the datafeed widely used to gauge the current market price for options contracts went into effect in February after three separate delays, which market participants say were caused by persistent bandwidth issues at some important recipients.
The IMD Wrap: No more turf wars, or why CDOs should heed the Voice of the CTO
Max reviews how our recent Voice of the CTO series has implications for those beyond a firm’s technology function, and how communication and collaboration between tech, data, and leadership will deliver better results.
Dark horse: Deutsche Börse building dark pool
New functionality allowing exchange members to execute sweep trades comes hot on the heels of European rival Euronext launching its own dark pool.
Man Group’s proprietary data platform is a timesaver for quants
The investment firm’s head of data delves into its alt data strategy and use of AI tools to boost quant efficiency.
Waters Wrap: The tough climb for startups
Anthony speaks with two seasoned technologists to better understand why startups have such a tough time getting banks and asset managers to sign on the dotted line.
As crypto ETFs become reality, benchmark providers take center stage
The SEC’s approval of the first spot bitcoin ETFs will expose a growing number of traditional market participants to the maturing world of crypto data, a moment that some—such as CF Benchmarks, BlackRock’s benchmark provider—have been eagerly awaiting.
Most read
- Women in Technology & Data Awards 2024: All the winners and why they won
- Witad Awards 2024: Above and beyond award (vendor)—Susan Bennett, Tradeweb
- Fighting FAIRR: Inside the bill aiming to keep AI and algos honest