The global securities lending market size was valued at USD 12.6 Billion in 2022 and is likely to reach USD 49.7 Billion by 2031, expanding at a CAGR of 17.7% during 2023–2031.
The market growth is attributed to the rising awareness of trading as a profession for stock brokers and traders. Securities lending is a recognized and established activity in financial markets that help provide liquidity to markets and extra returns to investors who lend securities.
Securities lending is the process that involves the owner of shares or bonds transferring bonds or shares temporarily to a borrower and in return, the borrower is required to provide sufficient securities lending collateral in the form of either cash or securities to compensate the fund. Lenders can generate additional income on their funds by lending securities to borrowers as a lender can put a certain amount of charging a fee on a loan, typically monthly that a borrower must pay and obliged to return securities on demand as per the contract or agreed loan period.
Securities lending is permitted by financial regulatory bodies and it is not permitted for all the funds. There are so many funds in the global market but to find out from thousands of funds, investors and advisers need more factual and statistical information to make a choice, and for that regulatory bodies have a document, Key Investor Information Document (KIID).
This document aids investors to make a more informed decision for lending securities and it is typically conducted through the lender's agent who receives a portion of the lending/cash reinvestment fees. The securities lending collateral are regularly calculated on basis of current market prices by lenders' agents to adjust loans accordingly.
At the end of a loan, the securities are required to be returned to the lender. The lender will receive a fee if the loan was collateralized by securities. If the loan was collateralized by cash, the lender may also earn a return or make a loss from the reinvestment of the cash collateral. The borrower fails to return the loaned securities in the agreed timeframe, subject to certain counterparty and liquidity risks set out below.
Global markets had a huge dip in 2020 due to the pandemic, but the revenues in the global securities lending market have bounced back in 2021 across every segment across the global markets and it is expected to boost in the coming years.
COVID-19 Impact on Securities Lending Market
The market report finds that the COVID-19 pandemic opened immense growth opportunities for the global securities lending market owing to the increase in the number of new investors in the global equity market.
During the pandemic, all the major industries were hindered due to the sudden lockdown across the globe which led to a sharp decline in revenue generation. The equities market across the globe crashed as the production of major global companies was temporarily shut down which led to a decrease in demand for products and services across the globe.
The equities markets were heavily crashed which opened new opportunities for new investors to enter the financial markets that led to an increase in the number of securities lending. New trading platforms were introduced during the pandemic as the number of investors rapidly increased, which resulted in an increased number of security lenders and borrowers.
Securities Lending Market Dynamics
The research report presents a complete market overview by providing detailed information about the current market trends, existing drivers, growth opportunities and potentials, and emerging challenges. The global securities lending market report has up-to-date insights about market scenarios that can shape the overall market performance and output during the forecast period, 2021 to 2030.
Drivers
The increase in the number of brokerage firms in the equities market across the globe can drive the global securities lending market. New upcoming brokerage firms are rapidly increasing as the rising awareness among new investors regarding financial markets. New brokerage firms are introducing fewer brokerage charges on equities and trading delivery that can attract new investors in the global market.
Brokerage firms are focusing on introducing easily accessible brokerage applications for investors in the financial services market. Increasing number of brokerage firms can be an essential factor for the boost in the global market as brokerage firms are the main aspect of the security lending process. The growing practice of trading activities such as hedging, short selling, arbitrage, and other strategies can boost the practice of equity lending in the global market as security lending is one of the important factors for these trading activities.
Restraints
High-interest rates on the securities’ loans across the global financial markets can hinder the global market. The loan fee and interest are charged pursuant to a securities lending agreement that must be completed before the stock is borrowed by a client.
In the securities lending process, a securities lending agreement or loan agreement must be completed to settle the transaction. This transaction includes loan duration, interest rates, lender’s fees, and the nature of the securities lending collateral. The lender’s fee and interest rates are usually high which results in a decrease in the number of borrowers that can impede the market growth.
Opportunities
In the financial market, trading is gaining rapid traction among professional traders as it gives lucrative returns on their investments in the stock market. Professional traders are mostly aware of technical and fundamental analysis that help in finding accurate results in their stock trading, thus, earning good returns. Moreover, the rising awareness among new stock traders about hedging and trading is expected to create lucrative opportunities for the market further.
Scope of Securities Lending Market Report
The global securities lending market research report includes an assessment of the market trends, market segments, and regional markets. Overview and dynamics have also been included in the report.
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Attributes
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Details
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Report Title
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Securities Lending Market - Global Industry Analysis, Growth, Share, Size, Trends, and Forecast
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Base Year
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2022
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Historic Data
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2016–2021
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Forecast Period
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2023–2031
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Segmentation
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Type (Equity Securities/Stocks, Debt Securities [Banknotes, Treasury Notes, and Bonds {Government Bonds, Corporate Bonds, and Municipal Bonds}], Derivatives Securities (Option Contracts, Future Contracts, Forwards Contracts, and Swap Contracts), and Hybrid Securities), Lender (Angel Investors and Venture Capitals), and End-user (Mutual Funds, Hedge Funds, and Proprietary Traders)
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Regional Scope
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Asia Pacific, North America, Latin America, Europe, and Middle East & Africa
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Report Coverage
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Company Share, Securities Lending Market Size and Analysis, Competitive Landscape, Growth Factors, Market Trends, and Revenue Forecast
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Key Players Covered in the Report
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BYN MELLON; JP MORGAN; STATE STREET; CITI; RBC TREASURY & INVESTOR SERVICES; HSBC SECURITY SERVICES; BLACK ROCK; and AVIVA
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Securities Lending Market Segment Insights
Type Segment Analysis
Based on type, the global securities lending market is divided into equity securities/stocks, debt securities, derivatives securities, and hybrid securities. The equity securities/stocks segment is expected to expand at a significant growth rate during the projected period owing to the various advantages of lending equity securities to borrowers.
In the process of securities lending, when the lender lends equity securities/stock to a borrower, that borrower receives all dividends/interest and corporate action rights on loaned securities and in return are contractually required to make substitute payments to the lender. The lender receives can gain additional income in the form of substitute payments for dividends from borrowers which results in the growth of the equities securities segment in the global market.
The debt securities segment is likely to register a considerable CAGR during the forecast period owing to the advantages of government bonds as these bonds promise assured returns and offers the stability of funds to investors. Bonds can be issued by companies and governments as these have a certain period of maturity period.
Bonds are further segregated into government bonds, corporate bonds, and municipal bonds. Government bonds are risk-free and bonds represent a promise by a borrower to pay a lender their principal and the interest. Interest payments are also known as coupon payments and with these coupon payments, investors can earn free income at regular intervals.
Government bonds are getting traction in the securities lending market as bonds have no risk of default. Government Securities are securities issued by the central government to borrow from the financial market to meet its fiscal deficit. These bonds have longer maturity periods than fixed deposits which is a good option for investors who are lending securities to borrowers to earn a stable fixed income.
In the Indian equities market, banks, corporations, and financial institutions were accessible to government securities but as per the Retail Direct Gilt Scheme launched in 2021, these securities are accessible to retail investors also.
Lenders Segment Analysis
On the basis of lenders, the global market is bifurcated into angel investors and venture capitals. The angel investors segment is projected to register a considerable CAGR during the forecast period owing to the benefit of gaining additional income on securities by lending them to borrowers. Angel investors usually apply a certain amount of borrowing fee on securities for a borrower and can gain additional income that can help the investor to offset expenses associated with portfolio management.
The venture capital segment is anticipated to account for a major market share in the coming years owing to the rapid increase in securities lending by venture capitals as these capitals are introducing their own lending agents in the global securities lending market.
End-User Segment Analysis
In terms of end-user, the global market is divided into mutual funds, hedge funds, and proprietary traders. The mutual funds segment is expected to grow at a significant rate due to the increasing practice of security lending in mutual funds in the coming years. Mutual funds lend stocks or bonds to generate additional returns for the funds and mutual funds further lend these securities to traders.
The proprietary trader segment is likely to register a considerable CAGR in the coming years due to the growing securities lending from proprietary traders as governments in emerging economies are introducing favorable schemes in the equities market to make these securities accessible to proprietary traders also.
Regional Analysis
In terms of region, the global securities lending market is classified as Asia Pacific, North America, Latin America, Europe, and Middle East & Africa. North America is expected to dominate the market during the projected period due to the increasing practice of lending securities and the presence of major key players in the region.
The market of the Asia Pacific is anticipated to expand at a rapid pace during the forecast period due to the rising awareness among new investors regarding the securities lending process and the benefits of additional income through securities. The increasing use of government bonds for lending securities in the region as these are safe compared to other assets.
Segments
The global securities lending market has been segmented on the basis of
Type
- Equity Securities/Stocks
- Debt Securities
- Banknotes
- Treasury Notes
- Bonds
- Government Bonds
- Corporate Bonds
- Municipal Bonds
- Derivatives Securities
- Option Contracts
- Future Contracts
- Forwards Contracts
- Swap Contracts
- Hybrid Securities
Lender
- Angel Investors
- Venture Capitals
End-user
- Mutual Funds
- Hedge Funds
- Proprietary Traders
Region
- Asia Pacific
- North America
- Latin America
- Europe
- Middle East & Africa
Key Players
Competitive Landscape
Key players competing in the global securities lending market are BYN MELLON; JP MORGAN; STATE STREET; CITI; RBC TREASURY & INVESTOR SERVICES; HSBC SECURITY SERVICES; BLACK ROCK; and AVIVA. Some of these major companies adopted various business development strategies including mergers, acquisitions, partnerships, collaboration, product launches, and production capacity expansion to expand their consumer base and enhance their market share.
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