November 29, 2021

Cal & Schwartz Capital brings securities lending mainstream

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Cal And Schwartz Capital LogoSecurities lending has long been a private arena, not anymore.

GRAND CAYMAN, Cayman Islands, June 11, 2014 /PRNewswire-iReach/ — Securities Lending has long been a private arena, dominated by big banks and institutional investor groups. Cal & Schwartz Capital, a private advisory firm located in the Cayman Islands is looking to change that.

Ned Ireland, Vice President and Lead Underwriter says thats the companies main focus ” We looked at the market and were just so disappointed with what was out there. Sure a market exist for Securities Lending and its huge, but its really only for institutional traders.”

The International Securities Lending Association (ISLA) a global regulatory association defines Securities Lending as the temporary transfer of securities by one party, the lender, to another, the borrower.

In general:

• Loans have no fixed maturity and either party can unwind the transaction on demand, known as an ‘open’ trade.

• The lender remains exposed to price risk on the lent securities since the borrower can return them at a pre- agreed price. Normally the lent securities remain on-balance sheet.

• The borrower agrees to compensate the lender for any dividends or similar benefits received on the lent securities by making (‘manufacturing’) equivalent payments

• The lender no longer has the right to vote on lent securities but can recall equivalent securities from the borrower if it wishes to vote.

• If the borrower provides securities as collateral to the lender, it pays a fee to borrow the lent securities. If it provides cash as collateral, the lender pays interest to the borrower and reinvests the cash at a higher rate, earning a spread.

Ireland believes Cal & Schwartz is positioned to capture market capitalization that doesn’t exist for smaller markets. Stating “Securities Lending is written as this impossibly complex trading mechanism that doesn’t work for smaller company’s and that couldn’t be further from the truth. We have found that in fact our product is superior and allows smaller companies the ability to raise capital in a environment much less stringent and quicker than transitional avenues.”

Cal & Schwartz has provided Securities Lending services since 2010, however they are recently taken a more public approach with the loans. In terms of qualifications, Ireland wouldn’t go into great detail but did state “We can only work with sophisticated investors. We do have screening programs put into place”.

Securities Lending, coming a market near you.

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