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London Firm To Open Stock-Lending Information Site

Investors Offshore, London

29 October 2002


Many commentators have blamed short-selling activity by hedge funds for some of the losses suffered by stock markets in general, and individual stocks in particular. Although most economists don't agree, and market operators think if anything that the reverse is true (ie that short-selling helps to reduce market volatility), the UK's Financial Services Agency (FSA) recently published a consultation paper setting out ways in which the transparency of short-selling market operations could be improved.

Now CRESTCo, the UK clearing and settlement house, has announced that it is working with Securities Finance Systems (SFS), a leading London securities financing consultancy firm to provide the market with intelligence on securities finance transactions at a stock level.

This week SFS is set to launch a new website, www.securitiesfinanceintelligence.com, which will provide interested parties with information about the service that will launch in January and demonstrate how they plan to present the data. There will also be the opportunity to register interest.

Detailed insight into securities financing transactions (both bond and equity) will be presented from securities settled by Crest in the UK and it will be available to anyone who wishes to subscribe. The move represents the first concerted effort by industry experts to give industry participants access to accurate data on the amount of securities financing activity (including stock lending and borrowing), taking place in the market. Such figures are thought by many to be a meaningful proxy for the short selling activity in the market and the best way to ensure that a wider audience start to recognise the clear distinction between short selling and securities lending.

The FSA is aware of this development and identified it in their recent Consultation Paper as one of three possible options to provide improved transparency. As it does not involve technical, operational or compliance cost it would seem to be the lowest cost and easiest of the three options. It is also the least intrusive option.

SFS comments: "Hitherto, the information vacuum surrounding securities finance has done nothing but harm the industry. Much recent comment in the media has been wrongheaded and damaging. We are working hard to ensure that our forthcoming service will present unique data in context with supporting analysis of trends and market dynamics to help securities lending overcome misplaced criticism. SFS envisages a broad range of subscribers seeing the value of turning unpublished market data into published market intelligence and benefiting from a greater understanding of this opaque activity.”


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