Automatic Securities Lending

Automatic Securities Lending, or ‘fails lending’ as it is also known, is designed to further improve settlement efficiency and reduce counterparty risk. Lenders can realise the full potential of their portfolio while at the same time borrowers can significantly reduce the risk of failure.

The programme runs multiple lending cycles throughout the day, identifies instructions that cannot settle due to a lack of securities provision and automatically lends the securities to the delivering counterparty so the instruction can settle.

Lending cycles are run on internal and Bridge instructions just before critical deadlines, such as the end of the mandatory period. They are also run on external instructions five minutes before the domestic market deadline.

Most loans are closed within minutes: we open and close around 1,000 loans per day. These 1,000 instructions are processed earlier than would otherwise be possible due to the efficiency of the lending pool.

Closing loans in real-time is critical for the success of fails lending, as the lent securities can be quickly returned to the lending pool and made available for other automatic loans.

Short-term lending via ASL in combination with ASLplus is a unique way of increasing portfolio yields by leveraging the demand for long-term strategic lending.