Securities Lending Times: The Debate

SLT article - Synthetics

The scales of synthetics

Rob Lees, Co-Head of Securities Lending EMEA and Global Co-Head of Securities Lending Trading, recently contributed to a Securities Lending Times debate on the rise of synthetic financing.

He commented that “The synthetic product has been traditionally rooted in its ability to provide market access and leverage. With global regulators creating additional cost pressures on the sell side, it is evident that synthetic trades can be used as a more efficient route to market from a balance sheet, liquidity and capital standpoint. That said, despite these positive conditions, the key challenges for synthetics are operational-, liquidity- and transparency-oriented. The ‘physical set-up’ has been well-established, scaled and battle-tested and the contractual, operational and regulatory component that underpins the physical world has been built for scale, cost and aggregation.

Separately, for many of our clients, the additional simplicity of legal set-up, collateralisation requirements and price discovery with wider market access has very clear benefits.”

The full article can be read on page 32 of the report by clicking here