Securities Lending, Repos & Collateral Management
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Description
This Euromoney Training course focuses on the international securities borrowing and lending and repurchase agreements (repo) markets. Its practical approach will provide you with an insight into how financial institutions lend and borrow securities, utilize repos as well as the collateral management processes that are required to support these activities. You will be given a thorough and clear understanding of how these markets operate, the risks involved, the economics of securities financing transactions and the administration and IT infrastructures required to support and control them. You will gain working knowledge of the life cycles of securities lending and repo transactions. The cou…Frequently asked questions
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Day 1 Introduction to Securities Lending Background and historical context of the securities lending market What is securities lending? Why it is important Securities Lending Market Participants Who are the lenders? Who are the borrowers? Who are the intermediaries? The Economics of Securities Lending How the lender benefits How the borrower benefits How the intermediary benefits Cash versus noncash collateral How fees are calculated Pricing‘ Specials’ versus General Collateral ‘GC’ Margin (or ‘haircut’) requirement Case study: Calculating fees on SL trades Exercise Corporate Governance and Securities Lending The beneficial owner Authorizing securities lending The legal position and documentation Lenders rights Voting Case study: How the use of SL can be abused The Maxwell case What Creates the Demand for Securities Lending Trading strategies Short selling Arbitrage Fails management Case study: Security borrowing to facilitate a convertible bond arbitrage Day 2 Life Cycle of a Securities Lending Transaction Striking the deal Booking the deal Confirmation Settlement What happens if the transaction fails Recall and termination Billing Systems and administration Exercise: Fails management and borrowing. Using a broker/dealer fails report, we will determine securities borrowing requirements Overview of Securities Lending Trading Platforms Electronic trading platforms How do they work The benefits Automatic Lending and Borrowing Who offers the service What are the benefits Why it needs to be managed Case study: Automatic borrowing going wrong Dividends and Corporate Actions How are corporate actions treated in an SL transaction Voting Tax issues and SL What are the Risks in Securities Lending and Borrowing? Borrower risk Collateral risk Cash collateral risk Intraday settlement risk Operational Risk Legal risk Reputation risk Recall failure Buyins Case study: What happens when you cannot return borrowed securities – a buyin Repos Sale and Repurchase Agreements (Repos) Background and historical context of the Repo market Reasons for the growth of the market The Market Participants The borrowers (or sellers) in a repo The investors (or buyers) in a repo The brokers Types of Repo The ‘classic’ repo transaction A reverse repo A sale/buy back Difference between repos, sale/buy backs and SL Why are repo’s used Benefit to the seller Benefit to the buyer Terms of Repo Transactions Open repo Overnight repo Term repo Repo rates and how they are determined Exercise: Using a dealers trade sheet decide repo and Securities borrowing requirements Day 3 Repos continued Repo Agreements Bilateral repos Hold in custody (HIC) versus delivery repo Triparty repos Who provides triparty arrangements Equity repos What are the Repo Dealing Risks? Counterparty/credit risk Collateral/issuer risk Market risk Operational risk Legal risk Stock specific risk FX risk Exercise: As Pension Fund Trustees, you have been asked to consider lending of the Funds securities assets. What questions should you ask? Collateral Management What is Collateral? Background and historical context of collateral What constitutes collateral in financial markets Collateral management since the banking crisis Leverage and the Basel Accord How it is used Products supported OTC derivatives collateral Collateral Usage Cash versus noncash collateral G10 government securities Other collateral The ISDA collateral survey Collateral Support Annex (CSA) Collateral Management Infrastructure Inhouse versus vendor solution Documentation and legal agreements Bilateral and Triparty arrangements Who provides the Triparty solutions Central counterparties (CCPs) Dodd-Frank & EMIR How do the CCPs operate Managing Collateral Agreeing a collateral schedule Agreeing a margin threshold Calculating margin Mark to market Haircuts Regularity of margin calls Monitoring and reconciling collateral receipts and deliveries, custody and settlement Substitutions Collateral arbitrage Dealing with coupon interest and corporate actions Case study/exercise: Drawing up a collateral schedule Collateral Risk Operational risk Market risk Concentration risk Legal Risk Valuation risk FX risk Increased overhead Course Summary and Close
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