Monthly Securities Finance Market Review: July 2023

Mike Norwood

August 2023

EquiLend’s Head of Trading Solutions, Mike Norwood, shares his monthly market review for securities finance amid ongoing global and economic turbulence. The following data has been measured and derived from EquiLend NGT.

Monthly Trends

July saw equity markets continue their advances with greater breadth as all U.S. sectors recorded gains for the month and EMEA, the UK and APAC turned in positive performances. Driven by relatively strong earnings reports as well as slowing inflation, bullish investor sentiment buoyed prices and kept the VIX at subdued levels. Securities lending activity, as measured by trade counts over EquiLend’s NGT platform, saw the start of the traditional summer slowdown with 2,362,598 trades executed versus $2.09 trillion, down 7.4% from June volumes but up 1% over July 2022.

Global Borrowing and Lending

Strength in the lending market was concentrated within the fixed income space (+17% m/m) as yields generally fell globally and valuations increased. U.S. corporate debt had a down month and the credit space saw a 4% reduction in demand overall, while EMEA (+6%) and APAC (+15%) were in focus. Interest in sovereign issues increased with a 6% gain over June levels.

Within equities, APAC was the only global region reporting increased lending activity (+3%), as South Korea and Japan were standout performers (+6% and +3%, respectively). Japan saw the Nikkei hit 30-year highs early in the month, which saw strong macro performance and sentiment, while South Korea has seen the continued interest in AI names push markets higher. Based on large prime brokers market observations, hedge funds are reducing risk and de-grossing—the reduction of both long and short positions to bring down leverage—in the face of what has been a surprisingly resilient market YTD as inflation has finally started responding to interest rate increases without the much-anticipated recession taking shape.

August is historically a relatively slow month as summer holidays are in full force. It’s likely that the next focus will be on the September Federal Reserve meeting and the messaging around target interest rates for the U.S. over the remainder of the year.

Sectors Focus

Within global equities, NGT’s most in-demand sectors were:

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 firm offering Trading, Post-Trade, Data & Analytics, RegTech and Platform Solutions for the securities finance industry. EquiLend has offices in North America, EMEA and Asia-Pacific and is regulated in jurisdictions around the globe.