European short selling bans and CCPs on BoE committee's agenda
28 November 2011 London
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Members of the Bank of England's Â鶹´«Ã½ Lending and Repo Committee (SLRC) noted that European short selling bans were disruptive for the equity securities lending markets and considered inviting CCP providers to future meetings.
Commenting on the short selling bans in France, Belgium, Italy and Spain imposed this summer, Richard Thompson, member of the Â鶹´«Ã½ Lending and Repo Committee representing the International Â鶹´«Ã½ Lending Association (ISLA), reported that, for equities, the bans had caused an unwelcome distraction in the securities lending markets as market participants had to interpret rules at short notice during difficult trading conditions.
Not surprisingly, the eurozone debt crisis and US sovereign downgrade were the key themes in fixed income. "In Europe, there continued to be short interest in Greek sovereign debt but there was reportedly less interest in short selling of ‘core’ European sovereign debt, such as German and French government bonds," the committee reports.
And though the market for US treasuries as collateral saw temporary lower demand amid concern that the US debt ceiling would not get raised, at the same time, it quickly returned to normal after the measure passed as well as after the subsequent sovereign downgrade.
Meanwhile, in a further signal that CCPs are becoming more ingrained in the securities lending industry, members agreed that the SLRC could act as a useful forum and that discussion would benefit from increased representation of CCPs on the committee. Some of the identified obstacles facing the advent of clearing in the securities lending industry are product design considerations and practical issues for implementation.
Commenting on the short selling bans in France, Belgium, Italy and Spain imposed this summer, Richard Thompson, member of the Â鶹´«Ã½ Lending and Repo Committee representing the International Â鶹´«Ã½ Lending Association (ISLA), reported that, for equities, the bans had caused an unwelcome distraction in the securities lending markets as market participants had to interpret rules at short notice during difficult trading conditions.
Not surprisingly, the eurozone debt crisis and US sovereign downgrade were the key themes in fixed income. "In Europe, there continued to be short interest in Greek sovereign debt but there was reportedly less interest in short selling of ‘core’ European sovereign debt, such as German and French government bonds," the committee reports.
And though the market for US treasuries as collateral saw temporary lower demand amid concern that the US debt ceiling would not get raised, at the same time, it quickly returned to normal after the measure passed as well as after the subsequent sovereign downgrade.
Meanwhile, in a further signal that CCPs are becoming more ingrained in the securities lending industry, members agreed that the SLRC could act as a useful forum and that discussion would benefit from increased representation of CCPs on the committee. Some of the identified obstacles facing the advent of clearing in the securities lending industry are product design considerations and practical issues for implementation.
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