Securities Lending 201: Principles of Securities Lending (Course)

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Course Overview
Principles of Securities Lending is designed to give individuals with securities lending experience an advanced understanding of the securities lending industry. Workshop participants will gain an appreciation for the evolution of the securities lending industry and the various participant motivations, and will apply the principles learned to hypothetical scenarios.

Who will benefit?
The workshop is appropriate for lending agent and lending fund representatives with trading, operational, legal, regulatory, and investment experience.

You will:

• Identify the risks and opportunities within a securities lending program.
  
• Understand various trading activities that create borrower demand.
  
• Realize the importance of collateral and identify different collateral investment instruments, techniques, and strategies.
  
• Have a working knowledge of international securities lending markets, how to enter new markets, and barriers to entry.
  
• Illustrate performance measurement and composite analysis of their lending program.
  
• Explore securities lending management and control considerations.

Course Outline

MODULE 1: Workshop Introduction and Review of the Objectives

• Securities lending history, risks, and opportunities.
• Trading activities that create borrower demand.
  
• Collateral investment instruments, techniques, and strategies.
  
• Approach to international securities lending markets.
  
• Performance measurement and composite analysis.
  
• Securities lending management and control considerations.

MODULE 2: Securities Lending Overview

• Definition of securities lending.
  
• Brief history of securities lending.
  
• The RMA Committee on Securities Lending.
  
• Size of the securities lending market.
  
• Mechanics of a typical lending transaction.
  
• Securities lending global process.
  
• The borrowers.
  
• Lending funds and lending agents.
  
• Securities lending advantages.
  
• Regulations affecting lending funds.
  
• Tax implications.
  
• Securities lending risks

MODULE 3: Drivers of Borrower Demand

• Motivations to borrow
  
• Reasons to borrow
  
• Borrower characteristics
  
• Diverse incentives

MODULE 4: Analysis and Characteristics of International Markets

• Review of the RMA Statement of Best Practices for Entering International Markets.
• Local regulations
  
• Taxes
  
• Ownership regulations
  
• Failed trades
  
• Agreement considerations
  
• Collateralization
  
• Portfolio servicing

MODULE 5: Collateral Investment Techniques

• Collateral guidelines
  
• Reinvestment guidelines
  
• Operational safeguards
  
• Agreement provisions
  
• Administration
  
• Review of market observations for collateral guidelines.
  
• Interaction of attendee comments with market observations.
  
• Discussion of collateral consequences and opportunities.

MODULE 6: Performance Measurement

• Duality of return
  
• Defined
  
• Evaluation
  
• Application of value-at-risk to securities lending

MODULE 7: Management Controls, Trading, and Operational Best Practices

• Separation of duties, checks, and balances
  
• Review of the RMA Statement on Best Practices for Segregation of Duties.
  
• Managing risk in derivatives transactions
  
• Review of the RMA Statement on Best Practices for Managing Risk in Derivatives Transactions.
  
• Guidelines for conduct
  
• Review of the RMA Statement on Best Practices Guidelines for Conduct.

WHAT MATERIALS WILL PARTICIPANTS RECEIVE?

Attendees will receive a full set of materials, including:

Participant Manual, including;
Modules 1-7
Appendices:

• Department of Labor Securities Lending PTE 2006-16.
  
• National Association of Insurance Commissioners Model Investment Law.
  
• Revised FFIEC Supervisory Policy on Securities Lending.
  
• 1997 IRS Tax Regulation on Certain Securities Lending Payments.
  
• Securities Investor Protection Corporation Letter on Securities Lending.

• Managing Noncash Collateral Loans - Module 2
  
• Investment of Cash Collateral - Module 2
  
• Entering International Markets - Module 4
  
• Segregation of Duties - Module 7
  
• Managing Risk in Derivatives Transactions - Module 7
  
• Guidelines for Conduct - Module 7

Group exercise/discussion worksheet handouts
Copies of presentation slides/overheads

WHO WILL BE LEADING THE WORKSHOP?
The faculty will be a rotating pool of professionals drawn from the securities lending industry and the Committee on Securities Lending. These individuals have extensive working knowledge of the industry and day-to-day responsibility for lending activity in this ever-changing environment.

Registration Fee
RMA members $750
Nonmembers $995

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