LendEX

[Sapphire Capital]

www.lendexchange.com/

Lend Exchange (LendEX) is an electronic auction market for DTC eligible equity finance products. LendEX facilitates trading for these financial products by providing universal access to information for all institutional trading participants.

LendEX is a membership-based system. There are two types of memberships available: LendEX trader and LendEX member.


LendEX Trader is an employee of a company that has a DTC # and can perform Equity Finance trades(borrow or loan).

LendEX member is an individual or company who has access to LendEX historical reports and real-time data through our "read only" market data screens. Read only members cannot execute transactions.

LendEX relies on a customer self-service approach.

From application to execution, LendEX offers traders and members a fully electronic, turnkey solution.

[Sapphire Capital]

March 10, 2008


Former SEC chairman Harvey Pitt and LocateStock founder John Tabacco are backing the launch of LendEX, a new securities lending platform that promises to generate higher revenues for beneficial owners than traditional custodial programmes.



The securities lending market is currently dominated by large custodian banks that lend client assets directly to broker/dealers, who then re-lend to end users such as hedge funds.

The business is believed to generate over $12bn in fees annually, though rough estimates indicate that beneficial owners may only see around $1bn of those revenues each year.

LendEX COO Victor Chilelli said the LendEX electronic marketplace had been designed to promote greater transparency and dynamic price discovery in this historically opaque market and enable beneficial owners to claim a bigger share of the fees paid by end users.

"We are focusing on getting a better deal for the beneficial owners and retirement systems because they really are the under served segment of this market," said Chilelli.

"They lend a tremendous amount of their portfolios but, due to the nature of the market, they don't see how much the end users are actually prepared to pay for those assets."

Pension funds and other beneficial owners will be able to list their inventory on LendEX at no cost and will receive email alerts when shares are borrowed.

New Jersey headquartered LendEX, which is co-owned by Tabacco and Harvey Pitt's consulting firm Kalorama Partners, has already agreed on a deal with the Alaska USA Federal Credit Union to act as the central counterparty (CCP) for transactions on the exchange.

As the CCP Alaska USA will stand between borrowers and lenders in all transactions, acting as a credit intermediary and maintaining the anonymity of the platform.

Alaska USA has established a new DTC number exclusively to facilitate LendEX activity.

LendEX will run dual T+0 and T+3 settlement windows so that beneficial owners can use the exchange as a complement to their existing custodial lending programmes, said Chilelli.

Beneficial owners could generate higher revenues by using LendEX because it enables them to lend their most in-demand securities - known in the industry as "specials" - to the highest bidder on an individual basis.

In custodial programmes "specials" are typically packaged with less attractive "general collateral" stock in order to improve overall utilisation rates.

Perceived inefficiencies in the custodian model have already given rise to third party securities lending specialists such as eSecLending, which has auctioned more than $1trn in assets since it was launched in 2000.

LendEX executives spoke highly of eSecLending, which provides portfolio lending services to large holders of securities.

They said both companies were pushing in the same direction and strived to provide "upward price discovery to beneficial owners."

LendEX is the latest in a line of recent initiatives aimed at introducing a transparent electronic trading platform in what remains a predominantly voice and email brokered market.

SecFinex launched its ‘Order Market' - an electronic screen based trading system for securities lending - in 2003, while the Eurex SecLend market has been open since 2005.

Interest in electronic trading picked up when ICAP announced the launch of i-Sec in April of last year, just months after Euronext said it was acquiring a controlling stake in SecFinex.

LendEX CEO John Tabacco said: "The securities lending market is becoming more efficient as different electronic solutions come to market. LendEX is the next progression. The LendEx platform will provide the necessary tools to add transparency and price discovery and move the industry closer to straight through processing."

LendEX is expected to launch with US domestic equities in Q2 of this year.