Monthly Securities Finance Market Review: Jan 2023

Mike Norwood

FEB 2023

Mike Norwood, Head of EquiLend Trading Solutions, reflects on securities finance trading activity for January 2023, with the backdrop of interest rate increases from the FED and BOE

Trading Analysis: Jan 2023

January was a strong start to the year for US equity markets with the NASDAQ (+9%) and SP500 (+4.6%) recouping some of last year’s losses on the back of easing, but still elevated) inflationary pressures and stronger than expected GDP growth. In a dovish turn, the Federal Reserve raised rates by 25bps in the face of 6% inflation, matching market expectations and contributing to an unwarranted rally in speculative names. The Bank of England took similar measures this month, raising the base rate to 4%. Looking at the data from EquiLend’s NGT platform, equity execution continued to be dampened by market performance with the VIX (CBOE Volatility Index) hitting its lowest levels in the 12 months since Jan 2022.

Equity and Fixed Income Trading Analysis

Fixed Income trading picked up the pace as borrowers showed continued demand for corporate bonds. Overall, 2,935,170 trades were executed v. $2.14T which represents -1% compared to December of 2022 and +1% year over year.  

Equity trading activity was flat across the board with the exception of EMEA which saw daily average volume down 9% from December. Fixed income increased by double digit percentages in all regions except Canada (-16%) with strong demand relative to last month in the US (+17%), EMEA (+28%), and APAC (+44% – although relatively light volumes). Average fixed income volumes of 22,540 represented an all-time high on platform with investment grade corporate (gc) debt still driving the bulk of activity.  

Top Trading Trends in Securities Finance

We saw a revival in meme stocks with a rally on AMC which saw a spike in activity as it approached the date to be eligible to participate in the exchange with APE shares (the AMC Pfd). This drove rates to borrow materially higher in the month of Jan. Read more on this in our Analysis from DataLend.  

In other trends, looking at overall activity, industrials (257,022 trades), consumer discretionary (234,326), and healthcare (233,070) remained the top three sectors. 

All Eyes on Central Banks for February and Beyond

Looking forward at this moment, markets are seemingly pricing in a relatively soft landing and continuing disinflation. This should continue the cash market rally and open up opportunities for evolving risk appetites that should fuel continued strong activity across securities lending, but much will depend on GDP, inflation and the corresponding responses by central banks. 

Follow Securities Finance Trends, Trading Analysis and Commentary with EquiLend’s Monthly Trading commentary across 2023. 

Who We Are

EquiLend is a global financial technology, data and analytics firm offering Trading, Post-Trade, Data & Analytics, RegTech and Platform Solutions for the securities finance industry. EquiLend has offices in New York, New Jersey, Boston, Toronto, London, Dublin, India, Hong Kong and Tokyo and is regulated in jurisdictions around the globe.