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OCC's stock loan service ends 2016 on a high

04 January 2017

OCC clears about 10-15% of the $2trn US equities stock loan market

Read more: CCPs securities lending OCC

Nearly two million stock loan trades took place on OCC’s central clearing platform in 2016 – a 37% increase on the previous year.

Primarily a derivatives clearing house, Chicago-based OCC has been building up its central counterparty (CCP) services for securities lending transactions in recent years.

It is currently the only US CCP for equity stock loan transactions, where it guarantees return of stock or cash to stock loan participants.

There are now 70 OCC clearing members using the service conducting close to 5,000 stock loan trades daily with open interest measuring approximately $190bn.

In December alone, the platform saw a 29% increase in new loans from December 2015 with 177,826 transactions last month.

"We estimate that OCC presently clears about 10-15% of the $2trn US equities stock loan market," said OCC’s Scot Warren last year.

"This growth reflects a continued shift toward CCP clearing."

New York-based securities finance company EquiLend entered into the central clearing market for stock loan trades in 2016.

The company acquired AQS, a platform which facilitates clearing and settlement via OCC.

"Momentum has been building in the past two years in support of CCPs in the securities finance marketplace,"  EquiLend chief executive Brian Lamb said at the time.

"Balance sheet costs, risk weighting and tougher capital-adequacy requirements have highlighted to the industry the potential benefits of using central clearing services.

Early adopters of CCPs in the securities lending market argue that opportunities for credit, capital and collateral efficiencies make central clearing houses a compelling value proposition for market participants.

Others have adopted a wait and see approach to CCPs due to operational concerns, unknowns around risk mapping, indemnification, pricing and reporting. 

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