Description

ABOUT THE COURSE

In the aftermath of the market crash, regulators looked carefully at the impact of short selling and the ability to facilitate this strategy by borrowing securities. With securities lending being essential for liquidity in the markets and settlement, together with the ability to generate yield enhancement, it is important that the process flows and controls issuesare clearly understood. Effective management of the process of securities lending and repurchase agreements is essential to reassure stakeholdersand risk managers but also in providing the vital liquidity in the markets and in settlement.

There is no better time than now to gain a thorough practical overview of these processes. This course will provide you with an in-depth grounding of the purpose and use; the processes associated and the controls over and management of securities financing. We will look at the implications of this in terms of both lenders and borrowers but also at the importance of the use of borrowed securities in managing settlement issues and in generating yield enhancement.

COURSE OBJECTIVES

During this intensive  course participants will gain:

• An appreciation of why securities lending came about and how over the years the emphasis has shifted
• A full understanding of the key elements of the security lending life cycle– the Lending Agreement– the role of the Pool Operators– the importance of adequate collateral management
•  A working knowledge of lending and borrowing, the products used and how to support the lending and borrowing process within your organisation
• A practical insight into the operational and risk management processes associated with managing securities and how to avoid the common pitfalls

COURSE CONTENT

Purpose and Development of Securities Financing

Controlling Settlement Risks

•  The post 2007/8 environment
•  Issues surrounding settlement risk– Default risks– Delays and additional costs– Replacement costs

Business Activity Attracting the Use of SecuritiesFinancing

• Securities– Clearing and settlement obligations– Securities lending yield enhancement– Repurchase agreements– Treasury financing
• Derivatives– On and o√ج¨‚Ǩ exchange derivatives collateral for marginrequirements and delivery requirements
•  Hedge Funds– Leverage collateral– Short selling strategies
• The Process of Securities Financing
• Securities lending and Repo Agreements– Motivations of borrowers and lenders– Variables and events– Repo use– Counterparty credit and market risk– Risk of repos
• Types of securities lending and repos

Exercise: Practical case studies using different forms of securities lending and repos to manage situations

– Term– Recall– Debt and equity repos– Sell/buy backs– Central bank usage√¢‚Äî¬è     Calculations of margin and collateral– Cash versus non-cash collateral√¢‚Äî¬è     Role of intermediaries in facilitating securities financing– Prime broker– Custodians– Depositories√¢‚Äî¬è     Lenders and borrowers expectations– Investment and pension funds– Retail funds – Hedge funds– Securities houses– Pool operators– Government agencies√¢‚Äî¬è     Collateral management

Exercise: Managing a lending situation and the collateral requirement

– Types of acceptable collateral– Hypothecation and re-hypothecation– Rights over collateral– Identifying the best collateral to utilise– Utilising collateral options in securities financing

Managing Securities Financing Process Flows

Exercise: The life cycle of securities lending and repos covering initiation through final close out

• Roles of key players– Custodians/depositaries– Depositories and CCPs– Prime brokers– Servicing hedge funds– Derivative clearing brokers– Treasury
• Movem