SunGard Identifies Ten Trends in Securities Finance

London – September 7, 2011 – Jane Milner, head of strategy for securities finance and collateral management in SunGard’s capital markets business, said, “The securities finance industry continues to transform in the midst of a slow economic recovery and impending new regulations. Customers are demanding greater transparency, consolidating systems to increase efficiency and reduce costs, and improving their processes in order to better leverage their securities finance business.”

The ten trends SunGard has identified as currently shaping securities finance are:

Industry dynamics are changing: hedge funds are sitting long, traditional long-only asset holders are creating hedge funds, and proprietary trading desks are being spun off. As a result, market participants are seeking ways to service these ‘morphed’ entities more effectively.

The introduction of more stringent regulation through Dodd-Frank, Basel III, EMIR, Solvency II and others will result in demands for increased transparency, tighter controls over short selling, the need for higher capital allocation (and therefore justification) for each business line, and more visible contingency planning for times of increased stress.

In addition to the greater scrutiny from regulators, clients are demanding more visibility of risk versus reward, backed by hard numbers. As a result, firms have significantly increased their focus on demonstrating risk mitigation in local and global markets.

Securities finance is becoming a liquidity management tool. Banks and asset managers can leverage their available inventory in order to generate the cash or high quality assets needed to meet new, more strenuous OTC derivatives collateral demands.

Collateral management is taking center stage as a tool to help mitigate risk and manage liquidity. Firms are recognizing the additional revenue generation opportunities that this provides both for their own organizations and their clients.

In order to replace lost revenues and achieve growth, firms are seeking access to new markets such as China, Brazil, Russia and India. This brings an increased demand for synthetic products and the need to support the nuances of these new markets.

The increasing emphasis on transparency is leading large global players to demand cross-geography, cross-product and cross-organizational views of key data in order to better manage their risk and leverage assets.

The industry is becoming more cost sensitive, which is driving firms to focus on system consolidation, centralization and optimization in trade execution and operations.

As they look to assess the capital needs and true profitability of individual product lines, firms are trying to minimize capital requirements through activities such as cross netting and central clearing, while at the same time seeking to ensure best use of ”cheaper” internal assets. They are also seeking ways to accurately allocate and measure the true cost of each underlying business.

There is an increased appetite for service-on-demand, from both a technology and an operations perspective, in order to better manage costs and to allow market players to focus on what they do best.

Josh Galper, managing principal at Finadium, said: “Regulations such as Basel III, Dodd Frank and Solvency II have begun to create deep rooted change in securities lending and collateral management. Banks, asset managers, insurance companies and other firms need to be sure that they have the right collateral to post at the right time for a variety of trading purposes and are taking the right collateral for their securities loans. The answer is collateral optimization, and the only way to do that is through technology. Firms that evaluate their collateral needs now will be best positioned to manage regulatory change both now and in the future.”

SunGard podcasts:

Tom Little, Quadriserv and Tim Smith, SunGard’s Astec Analytics business unit: Increasing transparency for the securities lending industry

Josh Galper, managing principal at Finadium: Trends in collateral management and regulation

SunGard video:

Jane Milner and Ted Allen of SunGard’s capital markets business: The challenges and benefits of enterprise collateral management

SunGard blog:

Jane Milner: On Securities Finance

About SunGard’s Securities Finance Solutions

SunGard’s securities finance solutions can help all types of securities finance market participant types improve their transparency, efficiency and business/systems networks. Customers all over the world rely on SunGard to fulfill their securities finance business needs through a comprehensive suite of securities finance solutions, from trade initiation through to final return; including order routing, trading, position management, operations, accounting, settlement, transaction analytics and benchmarking and trade automation services.

About SunGard

SunGard is one of the world’s leading software and technology services companies. SunGard has more than 20,000 employees and serves more than 25,000 customers in 70 countries. SunGard provides software and processing solutions for financial services, higher education and the public sector. SunGard also provides disaster recovery services, managed IT services, information availability consulting services and business continuity management software. With annual revenue of about $5 billion, SunGard is ranked 434 on the Fortune 500 and is the largest privately held business software and IT services company. For more information, visit www.sungard.com

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