Key Benefits
- Understand how securities lending trades are structured, priced, and settled across the full transaction lifecycle
- Strengthen your practical knowledge of margining, haircut calculations, and collateral management
- Identify key credit, operational, legal, regulatory, concentration, and liquidity risks in securities lending activity
Do You Need to Attend This Course?
The Trading of Securities Lending course is perfect for professionals working across various sectors of financial markets and securities trading:
If you are a stock trader looking to gain a solid long-term understanding of the mechanics of securities lending, trading platforms, transaction management and ways to enhance trading strategies
Investment managers seeking to learn how securities lending can affect portfolio returns and the associated risks
Custodians who wish to further their knowledge of the operational aspects of securities lending
Settlement professionals who are learning how the settlement process is affected by these types of transactions
Middle office personnel who are intent on furthering their trading skills and understanding how securities lending fits into broader financial systems
Risk, audit and compliance professionals who need a comprehensive grasp of the associated risks, regulations, and compliance issues within securities lending
Technical Content
Stock Loan Trade Fundamentals
Structure of the Trade: The Fee and how it is paid
The types of stocks being loaned
Basic Haircut
Shares as Collateral
USA Stock Loans (Cash as Collateral): Rebate rates
Securities trading course case studies
Lenders:
Pension Funds
Insurance Companies
Borrowers:
Hedge Funds
Investment Banks
Agents:
Global Custodians
Their role and how much of the fee do they get?
Sell/Buy Backs
A very similar product, but it can be very different
Sell/Buy Back pricing
Repo
Sale and Repurchase Agreements
Similar, but not the same
How Do You Make Money From Trading Securities Lending?
Matched trades … sourcing liquidity
Principal … buying portfolios from clients
Agency … taking a fee from best efforts lending
MSLA (Master Securities Loan Agreement )
How it works
Legal v Beneficial Ownership
Who gets the dividends?
Manufactured Dividends
Dividend Arbitrage: Price Arbitrage
Tax Arbitrage
Case studies
Short Selling
Borrowing to cover short sales
Profiting from short-selling
Securities lending training exercise: Calculating the profit …. Or loss!
Securities Settlement Basics
RTGS at a CSD: DvP
DFoP
Multilateral Netting at the CCP
Fails:
Impact on Short Selling
Cost of failure
Collateral
Cash or securities?
Margining
Haircuts: Haircut calculations
Exercise: calculating the haircut
Margin Calls:
Securities trading training exercise: Calculating the call
Who makes the call and when?
Why are the Stock loan securities delivered after the collateral?
Corporate Actions
It's not just dividends: Rights Issues
Bonus issues
Stock Splits and Reversals
Etc
Missed dividends… chasing the dividend
Collateral Management
Types of Collateral: Top quality Collateral v poor Collateral
Haircuts based on types of Collateral
E.g.: Treasuries 2% - Stocks 15%
Volatility
Advantages and disadvantages of different types of Collateral
The Risks
Credit Risk: Who is your counterparty?
Who is your Custodian? Sub Custodians
Operational Risk
Collateral is always delivered first before the loaned stock
Missed margin payments
Period of Risk
Legal Risk
Trading without the correct documentation
Regulatory Risk
Breaking the Rules
Illegal Tax Arbitrage
Concentration risk
Collateral Management Teams
Liquidity Risk
Training Objectives
Participants attending securities lending training can expect to:
Gain a deep understanding of how to structure a securities loan
A technical analysis of the role of the Securities Lending Agreement and how it affects “Legal” and “Beneficial” ownership
Understand how to use “Haircuts” and reduce the risk to the lender
Gain knowledge of the collateral types used in trading
Understand who is involved in these trades, such as pension funds, custodians, hedge funds, etc and their motivations
Understand the fundamental differences between Securities Loans, Sell/Buy Backs and Repos
Appreciate the role of short selling and the potential costs
Gain a thorough knowledge of how these trades are settled through DFoP settlement at the CSD
Learn how to trade Securities through lending and borrowing for negotiated fees in the active market
Training Course Summary
This programme takes an in-depth look at the participants and their motivations in the Securities Lending market. This robust securities trading course explores how the market operates and how trades are structured and settled. We take a very hands-on approach to each step in the process and examine the benefits to different parties and the risks.
Securities lending training examines the nuances of the lending market in great detail. From the fees charged, to how to calculate a “Margin Call” when more collateral is required.
This course provides an in-depth look at the Trading of Securities Lending, right through the life cycle. From Trading to Settlement, Collateral Management, Risk and more. Redcliffe presents the core principles to participants in an engaging, structured and clear way.
Your trainer
Course Trainer · 20 yrs experience
- Investment Banking Training
The course trainer has worked in Investment Banks, including HSBC and Bank of Montreal for nearly 20 years. During this time, he worked in Operations and then as a trader, running books in FX, bonds and derivatives.
He has run courses all over the world, including Amsterdam, Dublin, London, New York, Hong Kong, Singapore, Jakarta, Johannesburg, Delhi, Accra, etc.
He delivers courses that focus on providing a practical and in-depth understanding of the markets from a Trading, Operations and Risk viewpoint. His courses are interactive and stimulating, offering delegates the opportunity to participate in an environment that encourages free discussion of the real issues faced in the workplace.
In nearly 20 years of delivering training, he has covered a wide range of course topics, including:
Securities Clearing and Settlement
Trading and Risk Management
How to sell Derivatives
Treasury Management
Global Custody
Collateral Management
Operations Management Diploma for the Securities Institute
Asset Management Performance
Corporate Actions
Securities Lending
In addition to his training activities, he has undertaken various consultancy projects, such as an in-depth collateral risk assessment at a major European Investment bank.
The trainer held the position of Non-Executive Director of Cazenove’s Derivative Oversight Committee for many years. Acting as a member of the committee in a general consultative capacity to assess the firm’s derivative capabilities and risks.
He has also presented at JPMorgan Forums in London, speaking on topics such as the Benefits and Risks of Derivatives. He, along with representatives from the FSA, law firms, hedge funds, etc. were asked to give their views on the risks of derivatives to 150 / 200 Directors and senior managers from the top investment firms in the UK.
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