Securities finance experts met in Boston recently to discuss the strategic direction of the business and how beneficial owners can position for success. Here's what they said:

Jim McDonald, State Street: Returns should be good providing lenders figure out how to match off with demand. That requires more flexibility around structures and counterparties. The business is evolving and each participant will need to evolve with it or risk becoming less productive.

Brendan Eccles, Scotiabank: Flexibility will be the key factor. The agent lenders and their beneficial owners that work with us and tailor efficient solutions to help minimise costs are going to be the ones that we’ll do more business with.

Nancy Allen, DataLend: Greater tools and transparency will be available to allow beneficial owners to make educated decisions. Ultimately, that’s good for agent lenders and borrowers from a capital perspective. In addition, automation will be vital, and more market efficiencies will result in optimal returns for all participants.

Pat Morrissey, Vanguard: Will we begin moving away from just value lending? No. Will we take equities as collateral? No. For Vanguard, 2017 will be a year of analysis and deeper understanding. Evaluating riskadjusted strategies, both on our direct desk and with our lending agents, will form the bulk of the work. 

Ori Porat, Fiducia Optime: Certain market participants are bullish on distributed ledger technology, or blockchain, and predict it will displace players in five years. That’s too aggressive, but the financial services industry, including securities finance, needs to be wary of getting left behind. New technologies will certainly be a theme in 2017.

Bill Smith, JP Morgan: Blockchain may well play a role in securities finance. How soon or where it begins to affect our specific business remains an open question but blockchain does seem to fit with prevalent themes including cost reduction, efficiency and building platform capacity. I predict another round of business investment. There are incremental costs coming from a number of different places in order to meet transparency requirements and lender expectations. The business is going to become even more sophisticated.

Josh Gray, Russell Investments: Russell Investments will continue to look for opportunities to add incremental income with risk adjusted returns in its US securities lending programme. As the market adjusts/evolves due to regulatory reform and monetary policy, the firm will continue to have open discussions with its agents on how they are adapting to the change, if interests are still aligned and if flexibility and transparency is being offered/developed. Internally, Russell Investments will continue to monitor its programme governance and policies to ensure they are appropriate for current market conditions.