Topics: Repurchase agreement, Debt, Money market Pages: 94 (29297 words) Published: June 22, 2013
An Introduction to Securities Lending
Fourth Edition

Mark C. Faulkner, Managing Director Spitalfields Advisors

An Introduction to Securities Lending
Fourth Edition

Mark C. Faulkner, Managing Director Spitalfields Advisors
About the Author
Mark Faulkner is Managing Director and co-founder of Spitalfields Advisors Limited. The company is an independent specialist consultancy firm and its focus is upon the provision of consultancy services to institutions active, or considering becoming active in the securities finance markets, particularly beneficial owners. Spitalfields Advisors assists institutions embarking on securities lending reviews and also analyses existing programmes and suggests opportunities for improvement. Mark is also the Chief Executive Officer of Data Explorers Limited. The company provides clients with insights into comparative risk and performance measurement using proprietary Risk Explorer and Performance Explorer services. Data Explorers also conducts a wide range of quantitative research projects and benchmarking exercises on behalf of customers. The Index Explorer service highlights the potential impact of securities lending upon market prices and corporate governance. After graduating from the London School of Economics, Mark Faulkner spent the majority of his career specialising in International Securities Finance. Since 1987, he has held management responsibility at L.M. (Moneybrokers) Ltd., Goldman Sachs, Lehman Brothers and more recently at Securities Finance International Limited. Whilst occupying these different posts he has gained experience as a lender, borrower, conduit borrower and prime broker. During his career he has worked closely with the UK Inland Revenue and has represented firms at the Securities Lending and Repo Committee and the London Stock Exchange's securities lending committees. Being an independent advisor since 1995 has provided Mark with a unique insight into the operation of the securities financing market. To download a free copy of this book or contact Mark about it please visit: www.spitalfieldsadvisors.com

The views expressed in this publication are those of the author. Every care has been taken to ensure that the contents are accurate. However, neither the author, nor the commissioning bodies nor the publishers can accept any responsibility for any errors or omissions. The publishers or author can accept no responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication.


Spitalfields Advisors Limited 155 Commercial Street London E1 6BJ United Kingdom Published in the United Kingdom By Spitalfields Advisors Limited, London First published, 2004 © Mark C. Faulkner, 2007 Fourth Edition, 2007 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, without the prior permission in writing of Spitalfields Advisors Limited, or as expressly permitted by law. Enquiries concerning reproduction outside the scope of the above should be sent to the Publications Department, Spitalfields Advisors Limited, at the address above. This book may not be circulated in any other binding or cover and this condition must be imposed on any acquirer. Telephone: +44 (0)20 7247 8393 Fax: +44 (0)20 7392 4004 Email: info@spitalfieldsadvisors.com Web: www.spitalfieldsadvisors.com Design: Radford Wallis Printing: Linkway CCP

Table of contents

Acknowledgements Executive Summary Chapter 1 What is securities lending? Chapter 2 Lenders and intermediaries Chapter 3 The borrowing motivation Chapter 4 Market mechanics Chapter 5 Risks, regulation and market oversight Chapter 6 Securities Lending & Corporate Governance Chapter 7 Frequently asked questions Appendix 1 A Short History of Securities Lending Appendix 2 Terms of Reference of the SLRC Glossary Reference Sources

7 9 15 23 29 35 41 47 55 63 67 69 75


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