Standard & Poor’s Index Services has launched a public index series designed to measure the average cost of borrowing US equities.
The S&P Securities Lending Index Series seeks to reflect the average securities lending rate for the constituents of the S&P 500, S&P MidCap 400, S&P SmallCap 600, and the underlying GICS sector sub-indices for all three US equity benchmarks.
Securities lending is an over-the-counter market that involves the borrowing and lending of securities predominantly for the purpose of covering short-sale positions. The indices are designed to measure the securities lending rates associated with loans at the intermediary level, typically between custodians and prime brokers.
‘Standard & Poor’s is the first major index provider to publish an index designed to track the average cost of borrowing US equities at the intermediary level,’ says Craig Feldman, director of index services at Standard & Poor’s. "The S&P Securities Lending Index Series will provide investors and securities lending participants with additional transparency on the aggregate rebate rates charged for domestic equities, while serving as a relative benchmark for the securities lending industry."
In order to be classified as an eligible security in the S&P Securities Lending Index, a company must be a constituent of the related equity index.
Index constituents must also have a consistently available aggregate weighted average securities lending rate and are then weighted based on their respective weight in the related equity index. The index undergoes a daily rebalancing to adjust for all constituent and weighting changes that occur in the related equity index.
