Alternatives - What does the future hold for Securities Financing

The panel just finished and we are breaking for lunch.

Moderator: Ari Weinburg (Online Markets Editor, WSJ)

Panelists: Greg De Petris (Co-Founder Quadriserv), Leland Clemons (Director iShares, BlackRock), Ed Marhefka (Global Head of ISG Financing Sales&Marketing, Morgan Stanley), Paul Lynch (Director, State Street)

It was a lively discussion. It started off talking about the impact on ETFs on the securities finance market. The ETF creation for lending is very strong and has grown from the market 'standards' of SPY and QQQQ to include ETFs down the 'liquidity scale'. This growth is being driven by demand as ETFs can be created for lending supply.

The growth in demand of lending is due to ETFs being a simple hedge or 'shallow conviction' trade. Given the market movements the past few weeks/months I am not surprised by this.

There was also quite a bit of discussion on the central counterparty (CCP) and exchange models in the securities finance markets. A few of the panelists made a clear distinction between the CCP model and the exchange model. General view was that these models are important but demand is the key. If demand picks up it looks like the market will take it up - sounds like the classic chicken and egg problem.

The session wrapped up talking about regulation. Not surprisingly, the opinion on the latest German rules was not very high. The biggest complaint was the perceived lack of thought and piecemeal approach by the German regulators.

The next session is on Regulations (the theme of the day!).

Off to get some lunch.