New Money Review podcast

New Money Review podcast

Securities finance underlies every business story

May 24, 2022

Take any story in the daily business news and there’s likely to be a securities finance angle to it, says Roy Zimmerhansl, my guest in the latest episode of the New Money Review podcast.

Under his original plan to buy Twitter, Elon Musk, for example, was supposed to pledge Tesla shares worth $62.5bn as part of a margin loan. The debt was to be secured by that Tesla stock, which could be seized by the lenders in the case of default.

Musk is now trying to back out of the deal. But such repurchase (“repo”) and securities lending agreements are a critical but little-understood part of the financial markets.

Roy is a securities finance expert and someone well-equipped to throw light on this area. A 42-year veteran of the financial markets, during his career he has specialised in global custody, securities lending, prime brokerage and securities finance.

He was in charge of securities lending for several banks and broker-dealers and now runs his own consulting firm, Pierpoint Financial Consulting Ltd.

In the 40-minute podcast, Roy tells listeners why we should all be paying closer attention to securities finance. We cover:

  • Why securities lending and repo operations are critical to wholesale finance
  • How lending and repo can lower the cost of finance
  • Why your pension fund and insurer may be lending their shares and bonds
  • How the 1982 Drysdale default changed bond lending practices
  • How a US bankruptcy code change in 1984 sparked huge growth in repo
  • Why Roy turned down Barings bank as a potential client
  • Why having good collateral won’t protect you from a bad counterparty
  • Short selling bans, frozen assets and market liquidity
  • Why 2008 was the high-water mark for repo and securities lending