In current credit market conditions, the need for cash and high quality securities has created some interesting revenue perspectives for the securities lending sector, which is responsible for an international liquidity pool of $3000bn-worth of cash collateral.
Securities lenders, particularly in the US, have traditionally preferred collateral to come in the form of cash. Not only does cash pose a lower risk for the lender, it also provides the lender with an opportunity to reinvest the cash in a separate pool to gain further yield. In a liquidity-constrained market, such yield can be significantly higher.
