EquiLend Securities Finance Trading Q3 2022 Lookback

After a brief rally from July into August, concerns around inflation and central bank response dominated Q3 and drove global markets lower. Euro Zone inflation was estimated at 10% in September on the back of soaring energy costs related to the ongoing conflict in Ukraine and shutdowns of the Nord Stream 1 pipeline. The ECB, US Federal Reserve, and Bank of England have all raised interest rates with the US now sitting at 3%-3.25% on the back of an unprecedented three consecutive 75bps hikes. As a result, the dollar has strengthened significantly against the Euro, Sterling, and Yen which has generated concerns about economic growth and led the US Equity markets into bear market territory. Bond markets haven’t fared much better with yields rising massively in the face of steep price declines nearly everywhere.  

As a result of the structural issues in the European market we’ve seen 7% and 32% growth in activity across both Equity & Fixed Income markets respectively, year over year. September saw an all-time high in daily average trade counts for EquiLend’s NGT platform at 124,612 a day leading to a total of 2,656,024 trades (+1% over August and 12% y/y) v $2.55T for the month (+4 y/y). The notional increase is particularly noteworthy given the declines in equity and fixed income prices coupled with global f/x pressures. This closed out a 6th consecutive record quarter in trading volumes as Q3 saw 7,619,496 trades executed representing 1% growth from Q2 and 9% over Q3 2021.  

Strength was seen across the board, but it’s worth highlighting that interest in fixed income was elevated with corporate debt (+19%) and sovereigns (+12%) both trading far more heavily on platform than in Q3 2021; the increase in Sovereign & corporate activity signifies a growing concern throughout Europe for fixed income assets. Equities were also for sale globally with the number of unique securities in demand (non GC) hitting 30,000 in August. We continued to see interest outside the GC space as trades over 50bps hit 24% of total execution and more specifically EMEA (+190%) and the US (+66%) are embracing automation at greater levels than last year. The Asia Pacific region continues to be active, and September 2nd represented an all-time high in daily execution in region (24,872). Over the last year health care has largely been the most heavily in demand sector with industrials and consumer discretionary taking the 1 and 2 spot respectively over the course of Q3. Information technology and financials round out the top 5.  

Broker to broker has continued to be a theme for us as well with interest in high-rate GC driving 22% growth in this area year over year. We also see the broker-to-broker market represented via our ECS Loan Market program as the benefits of CCP trading help generate improved RWA profiles for users of a centrally cleared financing vehicle. Thematically we continue to see meme stocks actively traded across the CCP platform. GC should continue to trend in demand as we approach the end of the year and different balance sheet constraints push clients toward the platform.  

Given the global economic climate and with regulators in certain markets once again discussing barriers to short selling in protection of weakening markets, it remains to be seen how the balance of the year plays out but we expect activity in our markets to remain elevated.