Benchmarking the Benchmarkers

Ross Levin
Apr 21, 2016
3 min read

Over the years, as the Securities Finance industry grew to a multi-trillion-dollar business, trading in tens of thousands of instruments, it became apparent that market participants needed to be benchmarked against their peers.

Data Explorers (now Markit) was the industry pioneer and created the service in the early 2000s. Sungard's (now FIS) Astec Analytics Lending Pit solution followed the trend and, for years, they were the only companies covering the segment.

We will attempt to compare their products and service offerings and help business managers make the right determination in selecting one over the other.

Here are the characteristics that all three services share:

Lendable inventory value (around $15 trillion*)
Value of contracts on loan (around $2 trillion*)
Number of instruments (around 50,000*)
Both U.S. domestic and international programs
Offer Excel add-ins
Web-based interface
File based download

* As of the date of this writing

DataLend

DataLend, a division of Equilend, and the newcomer on the market, started capitalizing on their data derived from a subscription-based service used by the largest banks and broker-dealers.

Started their data offering based on the sheer volume of transactions processed by their subscribers
Market color is very accurate as they derive the data from Equilend transactions and all the largest agent lenders and prime brokers are Equilend users
Requires connectivity to Equilend networks and does not have interfaces with any other vendors

Lending Pit

LendingPit, a service by the Astec Analytics division of FIS (aka Sungard) stands out by automatically feeding all Loanet transactions into their service for their subscribers. Loanet is used by 200+ broker-dealers in the U.S.

The largest amount of data covering U.S. securities
Very accurate U.S. market color and clear delineation between cash/non-cash transactions with overall intrinsic value representation
Seamless integration with Loanet, which requires no additional processing if your company is using Loanet for securities lending business
Real time updates fed from Loanet allow you to see the just-in-time color for any traded security
Separate product for buy-side firms using the same dataset as Lending Pit

Markit

Markit, aka Data Explorers, started in the U.K. and, in the beginning, their primary focus was on non-U.S. securities. That notion shifted very quickly, and in a year or so they opened a U.S. office and started providing their service covering both U.S. and non-U.S. instruments. Since they were fully independent from the industry software vendors, they relied on their clients providing information to them in various files that were then compiled, checked for correctness, and collated.

The major advantage of Markit over the others is that they position themselves as a true Market Data company with their data supplied through Bloomberg, Reuters, and other enterprise data channels.

The largest amount of data covering non-U.S. securities
Full integration with Bloomberg, Reuters, and other market data providers
Requires data submissions by their participants

While all three companies provide very similar services, one of the major problems they all share is that the end data is only as good as what has been provided to them. Although all three are using some algorithms to reconcile the data to the best of their ability, they usually capture obvious mistakes, like value differences in comparison to the price of security, but have no ability to filter the data supplied. This is especially true for those providers relying on their clients to supply the data.

Here is a list of issues all three providers share:

Data manipulation where clients can supply the data selectively and/or change data attributes
Inability to tag special transactions related to cash financing, repo, or evergreen term contracts
Since there is no industry standard counterparty identification, reconciliation mechanism relies on what data is supplied by clients

The bottom line is, if you are in need of a benchmarking service as a secondary check exercise or for routine daily re-rates, select the least expensive provider, as long as it won’t be a major integration effort.

For those using Loanet, it doesn’t require any technology efforts to be able to use their Lending Pit service, and, as an added bonus, Loanet provides all benchmarking reports as a part of their reporting suite.

If you use Equilend, just like in Loanet’s case, not much effort is required to subscribe to their DataLend service.

If you are in need of a superior international data, go with Markit even though it may invoke some integration efforts.

If you rely on the benchmarking service for your day-to-day activities, and, especially, if you are engaged in a fully paid business, you can subscribe to all three services and then derive the weighted averages between the three. It may even help you creating a securities finance benchmarking arbitrage strategy.

Interested to learn more? Contact us for an in-depth assessment.

For more information on Primetech Management check out our Website and follow us on Twitter @primetechfin.