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PGGM looking to clear stock loan trades via Eurex

28 February 2017


Morgan Stanley and BNY Mellon’s support for Eurex big factor in PGGM's decision

Read more: CCP securities lending

Dutch pension fund PGGM plans to connect with European central counterparty (CCP) Eurex to clear securities lending trades.

Roelof van der Struik, who oversees PGGM’s stock loan operations, told Global Investor/ISF this week that he is "building up a business case" to connect directly to Eurex Clearing, not via an agent.

"We’re looking to get the plumbing in place after three or four years of sitting on the fence," he said. "The idea of centrally cleared stock loan trades is gaining traction.

"The fact that Morgan Stanley and BNY Mellon have thrown their weight behind Eurex Clearing's Securities Lending CCP is important to us," van der Struick, an ISLA board member, added.

Eurex, part of Deutsche Boerse, aims to bring central clearing to a significant and so far largely bilateral securities lending market.

Executives at the firm argue that the CCP route reduces counterparty risk and provides significant cost benefits to market participants with increasing capital requirements for bilateral exposures.

OCC is also attempting to attract a wider range of market participants, particularly lenders, to its own stock loan CCP service in the US.

PGGM would be considered an early mover among beneficial owners if it went ahead with its Eurex connection in Europe.

The company acts as service provider for six Dutch pension funds with €180bn assets under management.

It’s approach to securities lending is high value, low volume. 

Less than 5% of PGGM’s assets (equities) are out on loan at any one time and it has a restrictive list of counterparties.  

Only high quality bonds are as accepted as collateral and lending takes place through an agency (custodian).

Roelof van der Struik is an investment manager in PGGM's front office treasury department and a longtime advocate of securities lending. 

Last week he spoke at the World Pensions Investment Forum in London, arguing that securities lending can be part of responsible and risk-averse asset management providing the various risks (counterparty, collateral, market, operational, legal and regulatory) are managed.

"Securities lending is an activity that should be overseen by the front office," he told audience members. 

"The devil, in securities lending, is in the detail — make sure the scale and commitment is there to have securities lending expertise in-house."

He added that securities lending is an add-on activity and never the raison de d’être. Instead, it should be supportive of the fund investment manager and their returns.

"From a risk-return perspective, securities lending would seem to be a good investment," van der Struik concluded.


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