Stuart, can you tell me how the first half of this year has been for Sharegain?
It has been an excellent first half of the year for Sharegain and we have seen significant growth across all our business lines.
Not only have we increased the number of clients on our platform, but they in turn, have seen an increased adoption from their underlying clients. This increase in retail 'opt-in' is really encouraging and demonstrates that the retail client segment is embracing the opportunities that securities lending represents.
Retail asset owners are recognising the importance of the supplementary revenue stream generated by this fundamental ownership right.
In addition to growing our client base, we have also been focused on expanding the service we provide to clients and the market through new product launches. Primelocate is just one example, but we have also recently launched iFPL, our intelligent recall offering for registered investment advisors (RIAs), and most recently the Opt-in Hub, a solution that enables institutions to drive wider adoption of their securities lending programme.
Can you tell me how the current financial landscape is impacting prime brokers?
The political landscape and macroeconomic events have created an environment of extreme volatility, and that, generally, is good for hedge funds. Hedge funds like volatility, and if they are active, the prime brokers are active. As we are now engaged directly with 9 of the top 10 prime brokers, we see a good cross section of the activity that goes on.
One of the macro trends that has happened over the last few years has been the growth of the quant and model-driven hedge funds. For these entities, stock lending is very important. Also, for the first time in a decade, there has been an inflow of money into traditional equity, long-short funds 鈥� again, these are strategies that require access to a wide selection of good, stable borrowable securities. That overall trend has been positive for the primes. If it helps the primes, it helps us as an agent lender, and our clients as well.
While engagement with retail can be seen across many product lines in the financial industry, securities lending has been one of the last to fully adopt retail as a viable client base.
I have no doubt that the demand for differentiated sources of supply, particularly in small cap names, is driving this engagement from the prime brokers
In June, Sharegain launched Primelocate to help prime brokers expand access to small and micro-cap securities. Can you explore the significance of this offering?
The concept of Primelocate is about doing things differently. It is about expanding the product offering in a way that makes sense for all participants. What we are seeing through products like this, is a redistribution of interests. Our clients are interested in how they can mobilise and monetise their supply, and we are assisting them in doing that in a way that makes sense for the prime brokers and their end demand as well.
Sharegain has a lot of industry experts, but also a lot of people that come from other fields with very fresh ideas. Primelocate is an example of how fresh perspectives challenge the established way of doing things.
Sharegain is adapting traditional securities lending workflows to address the unique challenges and opportunities that retail presents. In the case of Primelocate specifically, we are using a subscription model paired with fixed-cost borrow to mobilise small positions primarily in micro-cap stocks which may not otherwise be made available.
The importance of the offering is that it is another way to increase the breadth of lendable supply in the market. As we have said before, retail lenders are becoming much more relevant in the market, and the significance of this, as far as I am concerned, comes from the fact that they do not interact with the market in the same way that traditional, institutional lenders do. Retail generally tends to hold a greater portion of small and micro-cap names because they are not subject to the same constraints as institutional lenders are 鈥� they do not have risk committees, investment targets, or tracking requirements, for example.
One of the most important factors for quant funds is the breadth of securities they can use within their models. The more names that you can show them, the more trading opportunities that they have. Sharegain has already demonstrated that, through our standard retail offering 鈥� we have already brought thousands of names to the marketplace that have never previously traded.
With Primelocate, we have packaged up thousands more smaller positions in a way that allows the prime brokers to offer increased breadth of availability to their hedge fund clients. For many of them this is a franchise play.
We have tried to make things simple by providing fixed-price lending, real-time online access to these tiny little names. Previously, primes would have had to scour all sorts of sources to try and locate these names, or even buy positions themselves to satisfy the demand of key clients. This can be time consuming and risky, Primelocate makes getting access to these small names straightforward.
Why is now the time to introduce Primelocate? Where do you intend on taking this offering
going forward?
With any product, timing is key. In the case of Primelocate there are two factors at play that means this is the ideal time to launch.
Firstly, the ongoing growth of platforms and quant funds, i.e. growing demand. Prime brokers need to differentiate themselves in the eyes of these strategically important hedge fund clients. Prime brokerage in general is becoming very commoditised, very price-driven, very standard across the market. Anything that the primes can do to differentiate their service is well received 鈥� one differentiator is the breadth of securities their lending programmes can offer. So, there is demand for this product.
On the supply side, Sharegain has grown significantly over the last year and is bringing more and more retail aggregators into lending, through them we now have access to millions of retail clients. Therefore, the breadth of inventory that we are seeing is also increasing, as this retail adoption grows. As retail continues to get more comfortable with securities lending, they are looking for efficient ways to generate revenue across their entire portfolios.
Primelocate matches this increasing supply and increasing demand.
Sharegain CEO Boaz Yaari once said: 鈥淣ew supply from retail investors creates new trading opportunities for borrowers.鈥� Why is that important and how does Primelocate fit into this?
For many model-driven hedge fund strategies, the ability to go short a particular security is critical for it to be considered 鈥榯radeable鈥�. Being able to locate borrow in a security means that it can be consumed by trading models and investment opportunities evaluated. This does not automatically mean that a new, borrowable security will be shorted (indeed model signals may suggest going long or doing nothing at all). But by constantly adding new names, we are helping to grow a model鈥檚 investable universe. This allows funds to diversify and optimise their returns.
Retail availability also tends to offer better stability in these smaller names than equivalent institution supply. If you are looking at an institutional lender, it is usually one person that is making the decision. When you are looking at retail, it is hundreds of thousands of people, and they all have different views. While an individual position may be unstable, collectively, it is actually very stable.
In the past, hedge funds may have shied away from trading in certain securities because the borrow was very thin or unstable; by bringing this retail inventory to market, we are creating a stability that allows funds to execute ideas that may require a longer-term view. It has taken a while to demonstrate this but as retail pools continue to grow, this collective stability factor is becoming evident.
Going forward into the second half of the year, what will be top of the agenda for Sharegain?
At Sharegain, we have never been busier 鈥� the pipeline of onboards in the second half of the year is the strongest we have ever seen. The remainder of the year will be focussed on three pillars.
Firstly, the consolidation of our recent go lives 鈥� we will be supporting new clients already onboarded this year (the likes of Wealthfront and Freetrade) to optimise their programmes and grow engagement with their underlying clients. The biggest focus is going to be to continue to build momentum and push the retail lending message.
Secondly, we are focussed on continual product development to support our existing client base and to use technology to address the unique challenges and opportunities that retail securities lending presents. Retail lending has been a constant topic of conversation at recent industry events, and the more people that focus on it and on how it differs from institutional, the more opportunities we will identify. For example, we have recently helped one of our clients, BUX, launch a unique product where, through the creation of continual borrow demand, they pay their underlying retail clients a fixed fee simply to hold ETFs.
Finally, our sales team is continually focused on delivering the benefits of securities lending to a wider audience. Sharegain has a strong footprint in Europe and the US, so the natural next step is to look at the opportunities within Asia.
Markets like Hong Kong, Singapore, and Korea have a long history of retail share ownership and also have an established lending framework. While retail lending is not new in local markets, bringing scalable, multi-jurisdictional solutions to retail investors presents numerous challenges. The demand from clients in this region and the cultural willingness of individuals to engage with new products and new technology means that Asia is a region of great potential for Sharegain.
Our sales team is also focussed on getting supply out of the Middle East, where despite the unique regulatory challenges, we are seeing strong appetite. The structure of asset ownership in the Middle East presents a lot of opportunities which we want to try and monetise, so we are working with brokers, infrastructure, and with industry participants to see how we add value here.
How do you anticipate the second half of 2025 will play out for the securities finance market?
The overall direction and profitability of the securities finance market will, as always, be driven by macro events, so it is impossible to predict how the year finishes. So far, 2025 has been a good year for prime brokers, and even though volatility has decreased recently, I have no doubt that the second half of the year will continue to offer opportunities.
One thing of which I am confident is that retail lending will continue its journey from niche to mainstream. Sharegain has been at the forefront of this transition for many years but the recent announcement from BNY regarding eToro demonstrates that more traditional players are identifying the opportunities and the need to engage with this client segment.
The factors that have driven this transition are only growing 鈥� retail clients are demanding the same access as institutional accounts; providers need to diversify revenue streams and grow service offerings; and borrowers are looking for broader access to liquidity.
The traditional drivers of securities lending profitability are changing.
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Russell Nethercot
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