EquiLend Securities Finance Q2 Lookback
Mike Norwood, Head of EquiLend Trading Solutions, provides insight into the market trends seen throughout Q2 while reflecting on EquiLend’s record quarter in relation to volumes traded across the global platform, resulting in growth year over year.
Global equity and bond markets were both under pressure in Q2 as rising inflation, interest rate hikes, and chances of recession were evaluated by investors. The US Fed and Bank of England both raised benchmark rates while the ECB is expected to in order to combat inflation that has accelerated to a 40-year high spiking global bond yields and weighing on equity prices. Volatility remained at elevated levels driving robust activity within the securities lending market with global revenues +6% year over year to $4.8b for lenders in the first half of the year. Strength was also evident across the EquiLend Trading suite. NGT experienced a record quarter for volumes with 7.5m trades executed (+14% year over year) v $7.9T (+8% y/y) and balances in our ECS Loan Market up 19% year over year.
Within NGT activity, volume growth was marginal (+2%) over Q1; however, the year over year increases reflected strength globally with double digit percentage point gains in APAC, EMEA, US, and Canada. Looking more closely at Equities, EMEA continued to standout as volumes were up 32% over Q2 last year with APAC up 24%. This is largely driven by increased activity in Japan where onshore activity hit record transaction levels across the platform with 23,500 executions across 48 unique entities.
Trades at fees greater than 50bps made up a fifth of overall activity based on trade count for the quarter reflecting increased utilization of NGT by existing clients as well as the greater number of securities trading off GC globally. Corporate debt saw increased interest as volumes rose on platform reflecting the broader bond market sell-off and underperformance relative to sovereigns.
Over the ECS Loan Market, balance sheet utilization continued to drive growth on the marketplace. Firms continue to seek sources of high-rate GC. Similarly to NGT, we saw strong demand for ETFs despite the collapse in issuance in the corporate debt markets which impacted demand for fixed income ETFs such as LQD and HYG. Overall Q2 was busy with GC flows continuing to buoy activity on the back of RWA compression needs.
EquiLend is a global financial technology, data and analytics firm offering Trading, Post-Trade, Data & Analytics, RegTech and Securities Finance 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.