Monthly Securities Finance Market Review: March 2023

Mike Norwood

Apr 2023

Mike Norwood, Head of EquiLend Trading Solutions, shares his monthly market review as we close out Q1 2023, a quarter that saw fast-moving markets and record highs in trading volumes amidst rate hikes from the Fed and continued global and economic turbulence.

Trading Analysis: March 2023

The old adage of March coming in like a lion, going out like a lamb was flipped on its head with regard to securities lending trading activity across EquiLend NGT in March. After a relatively quiet start, 2.9 million trades were executed, representing an all-time monthly high in trade counts and a 5% increase over the previous monthly high set in March 2022, and 22% higher than February 2023. 

As went March, so went Q1 as markets fluctuated in response first to stubborn and uncomfortably high inflation, then to central bankers’ responses as rates were raised aggressively, and then to concerns of a credit crunch in the regional bank space as Silicon Valley Bank went under. Further indicators of volatility followed as ripples through the global markets yielded concerns about Credit Suisse and ultimately resulted in an acquisition by UBS. This disruption yielded a return to volatility, and the VIX rose to levels last seen in October 2022. Volatility yields lending activity, and as such we saw high volumes throughout the quarter and can report a return to record volumes with 7,689,090 trades executed versus $7.3 trillion in Q1 (up 3% year over year).

Securities Finance: Top Performing Sectors

Industrials, financials and healthcare names were in focus and represented the 3 most active sectors, with financials climbing up from #5 in February on the back of the regional bank and Credit Suisse/Deutsche Bank news.

Financial sector volatility drove trade count growth on NGT where we observed multiple subsectors with decidedly increased activity. Fintech names were impacted as negative sentiment entered the sector following news related to Square (SQ US). MSTR was also in play. Regional banks were another highlight in the U.S. on the back of SVB’s collapse. Names including MTB were heavily featured on NGT trading flow in March. For Europe, sticking to sector themes, Real Estate Investment Trust (REIT) related stock SBBB SS was a highlight name. Overall, we saw consistent growth in trade counts for Q1 as below.

Equity and Fixed Income Trading Analysis

March also saw the release of NGT’s Competitive Bid platform aimed at providing an electronic marketplace for the hard-to-borrow market. As focus continues on bringing automation to all sectors of the securities lending market, execution in the non-GC space hit a new record of 638,040 trades versus $218 billion. Fixed income continued to run with investment-grade corporate debt still accounting for the bulk of this activity, but it is of note that close to a quarter (23%) of total trades executed are now in the fixed income space. The non-GC and fixed income activity drove the entirety of year-over-year growth as throughout Q1 GC trade counts remained flat on last year.

Going forward, the only certainty is uncertainty, and until there is more clarity on the direction of interest rates and the stability of the global economy, markets are likely to remain unpredictable.

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.