Securities Lending Platforms Expand

Terry Flanagan

Quardriserv rolls out direct broker-dealer platform.

Electronic venues for securities lending are expanding their offerings to create platforms exclusively for large broker-dealers to engage in high volume, large ticket transactions via bilateral, customized trading.

Quadriserv’s newly-launched AQS Direct, a broker-to-broker electronic stock lending venue with central counterparty clearing, will run parallel to its established AQS, a CCP-based marketplace in the U.S. for automated securities lending trading in over 5,000 underlying equity, ETF and ADR products.

“AQS Direct was developed at the request of the large broker dealers who are also clearing member firms of OCC [Options Clearing Corp.], in order to execute large transactions,” Pasquale “Pat” Cestaro III, vice chairman at Quadriserv, told Markets Media.

Although they can perform this on AQS, but having AQS Direct makes this process “a little cleaner,” said Cestaro.

“Instead of having multiple small counterparties, on AQS Direct they will have large counterparties who are more able to fill their tickets to borrow or lend securities, so the result is fewer tickets and fewer moving parts to keep track of,” Cestaro said.

Launched in 2009, AQS offering an accessible and transparent market with a central order book adds for the securities lending industry, proving opportunities for capital efficiencies, lower operational costs, optimization from netting, mitigation of counterparty risk and an ability to interact with an expanded pool of lenders and borrowers via a CCP. The company said.

“Although Dodd-Frank does not require securities lending to have a CCP, the SEC was directed to promote transparency of securities in the act,” said Cestaro.

When Quadriserv started the process of creating the original AQS platform for electronic borrowing and lending of securities, it was clear from the securities lending industry that there was a need for a place to execute securities lending transactions in a transparent, electronic and accessible venue with a central counterparty to mitigate risk.

“The central order book means that market participants, or anyone with access to the AQS market data, can see the prices offered and requested, along with the borrowing rates, on AQS,” said Cestaro.

As a Finra member broker dealer and a SEC regulated alternative trading system, AQS aims to maximize liquidity, access, credit and transparency, while mitigating systemic risk, through a fully automated trading environment.

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