Preparing the Canadian market
23 June 2026
Reviewing the Canadian Securities Lending Association 2026 conference in Toronto, Hansa Tote uncovers market themes, trends, and projections discussed by industry participants
Image: CASLA
It wasn鈥檛 just the Toronto Blue Jays beating the Miami Marlins in baseball that set Toronto abuzz on 27 May 2026, as industry experts gathered for the 16th annual Canadian Securities Lending Association (CASLA) conference.
Associations update
Kicking off the conference on Canadian securities lending, panellists gathered to provide updates from their associations, and look to the year ahead.
Looking back over the past 12 months, Fran Garritt, CEO of International Securities Lending Association (ISLA) Americas, noted that much of their recent work has been on regulatory change and the move into implementation.
He highlighted that they have worked with members of the association and regulators to get the implementation deadline of the US Securities and Exchange Commission鈥檚 (SEC鈥檚) 10c-1a pushed out, and they are beginning to work with members to advocate for certain points within 10c-1.
One other key focus he detailed was on operational resiliency, lending itself to a discussion around cyber risk, interoperability, and, at a high level, ensuring that securities lending markets continue to function in a safe and transparent way.
Garritt stated that the association is also spending an increasing amount of time helping members to navigate market fragmentation within the US, but also across markets such as Brazil and Mexico.
Daniel Austin, head of US markets policy and regulation at the Alternative Investment Management Association (AIMA), commented that over the last 10 months, AIMA has been engaging heavily with the SEC on modernising SEC Rule 105 to make it more fit for purpose to reflect the dramatic growth in overnight and one-day secondary offerings. He explained that an updated Rule will further the SEC鈥檚 goal of facilitating capital formation.
Ina Budh-Raja, CEO of ISLA, explained that the association is operating through four key execution pillars: advocacy and regulatory strategy, legal services, market structure and digital, and events and communications. It is through these pillars that the association is focused on delivering member value.
In relation to advocacy initiatives generally, ISLA has been working to address regulatory change impacting the securities finance industry. A part of the association鈥檚 role is to advocate for regulation that is proportionate, promotes growth and liquidity, while also preventing inadvertent negative consequences.
She highlighted the significant, current focus on capital efficiency, particularly in the light of the US Basel reproposals, as well as recent progress in the market in developing capital efficiency tools, for example, the central counterparty (CCP) model.
Budh-Raja stated that, from a public policy perspective, the focus on jurisdictional growth and innovation is a key driver for policymakers, which may lead to cross-regional fragmentation, driven by local competitiveness agendas.
Regarding the growth in retail lending, particularly through neobrokers, she noted that ISLA is engaged with this sector and is working on developing best practice guidance to encourage this growth sector to adopt established frameworks and standards, to ensure regulatory expectations are met, such as in relation to regulatory treatment of underlying retail clients, asset safety, and transparency on costs and charges.
Shifting the discussion to the future, Garritt noted that in January 2026, he had four overarching goals, one being advocacy. He said that ISLA Americas is currently in the middle of responding to Basel III Endgame, with the hope that the Federal Reserve will provide clarity on bankruptcy remote protection (referred to as pledge).
The second goal was to focus on developing markets, with working groups focused on Brazil, Mexico, and the Nuam market including Chile, Colombia, and Peru.
Brazil is currently the most active market, Garritt said, and he hopes that by the end of the year, the association will receive further clarity regarding how the market is going to open, especially as the country seeks to move to T+1 in 2028; meaning that having a functioning securities lending market will be helpful.
The third goal for the year is continuing to bring the industry together through events and working groups.
Fourth and finally, he aims to create further alignment with ISLA in creating a global brand and offering, to ensure member firms are seeing the value of the association.
Discussing the year ahead, Budh-Raja spoke about the current regulatory change agenda in Europe, stating their association is advocating for harmonisation, particularly on the beneficial owner and tax side across the region, where there is fragmentation across 27 states. She also mentioned active advocacy for recognition of pledged collateral arrangements for Undertakings for Collective Investment in Transferable Securities (UCITS).
She highlighted the move to T+1 for the UK and Europe in 2027 and the consensus-driven best practice being developed continuously by ISLA in collaboration with the market, which the market can now begin to use when looking at implementation and testing.
Further, she emphasised the benefits of the collaborative relationship between ISLA and CASLA, highlighting areas of advocacy, training and events, where partnership with peer associations have been extremely effective. She also reiterated that the ambition of ISLA when establishing its affiliate entity, ISLA Americas, in 2024, was to strengthen the advocacy voice for the industry, by building a local presence regionally.
Moving the conversation to regulation, Austin noted AIMA鈥檚 challenge to the SEC鈥檚 2023 rules on securities lending and short selling.
Last August, the US Court of Appeals for the Fifth Circuit remanded the rules to the SEC, directing it to consider and quantify the cumulative economic impact of the rules, holding that the Commission failed to consider the economic impact the short sale rule would have on the securities lending rule when they were promulgated in tandem and adopted concurrently on the same day. Despite this direction from the court, the Commission has not produced the economic analysis.
According to Austin, the association鈥檚 primary concern with the securities lending rule is that because of the granular, loan-by-loan reporting framework, there is a heightened risk that sensitive position or flow information will leak into the market and cause commercial harm.
Tokenisation鈥檚 future in securities finance
During this panel, experts gathered to discuss the role of tokenisation in the securities finance market and beyond.
The speakers 鈥 Will Babcock, director of structured products, banking, at Cantor Fitzgerald, Cale Newhouse, product manager at BNY, Fabrice Tomenko, head of digital trust at Clearstream, and Robert Cousart, US head of product and platform, cash management at BlackRock 鈥 delved into the real-world applications of tokenisation.
The session 鈥 moderated by Claire Van Wyk-Allan, director of business development, prime brokerage at TD Securities 鈥 offered the audience insight into how tokenisation has transitioned from concept to practical infrastructure for institutional markets.
Tokenisation, in essence, is the modernisation of the operational rails behind the assets, and within the discussion, the panellists set out to answer a simple but multi-faceted question: why does it matter?
For Babcock, a key benefit of tokenisation is connecting onchain liquidity with yield-bearing structured and fixed income products, utilising DeFi as more efficient funding for credit. The majority of stablecoins, he said, are 鈥渮ero per cent yield-bearing, and if you look on the traditional finance side of the world, that doesn鈥檛 really happen鈥.
Tomenko shares this perspective. He underscored the significance of risk and inefficiency in cross-border securities lending and collateral, viewing tokenisation as a mechanism to 鈥渟olve these problems鈥 through its ability to 鈥渞epresent the ownership of securities on a platform which can change its ownership 24/7鈥. Significantly, he added that tokenisation has the potential to alleviate exposure during cross-border swaps and tight intraday margining.
Cousart, in keeping with his area of expertise, views tokenisation through the lens of cash management and corporate payments. Corporations are moving money around within a plethora of different sub-accounts, which he describes as a 鈥渕anual process鈥 involving 鈥渓ots of reconciliation鈥. Distributed ledger technology (DLT), and the assets that it enables 鈥 specifically stablecoins 鈥 have the potential to automate time-consuming processes and improve efficiency.
He also sheds light on the uptake in the number of firms bringing public funds to market and utilising tokenisation technology 鈥 including BlackRock, J.P. Morgan, Fidelity, WisdomTree, and Franklin Templeton 鈥 implying that the industry recognises its potential value.
24/7 Settlement and tokenisation, said Newhouse, may improve the extreme settlement concentration that occurs within the 鈥渇irst 30 minutes of a trading day鈥 in US Treasuries. He believes that both TradFi and DeFi interoperability enhancements are needed to achieve genuine always-on markets, and that tokenised assets are 鈥減articularly well suited鈥 for this fundamental upgrade. The relatively small US Treasury settlement window of today forces decision-makers to plan the next 24 hours 鈥 鈥渁 long time鈥 in today鈥檚 financial markets.
This concentrated settlement forces banks into a position where they must pre-fund cash and, in essence, hold it on their balance sheets. An incremental improvement in efficiency, driven by tokenisation, would act as a net benefit to institutions operating within these windows.
The emergence and evolution of onchain markets have fostered an open-source lending environment that is more capital efficient than its TradFi counterpart. Babcock highlights the fact that a BBB-rated security can be bought and potentially pledged to DeFi lending protocols 鈥 such as Aave 鈥 effectively repo financing onchain.
The combination of programmable liquidation and deep onchain liquidity has changed investors鈥 perception of collateral risk when compared to some traditional assets.
Cousart sees smart contracts as a 鈥渨alled garden鈥 where tokens can 鈥渙nly be sent to certain digital wallets that are onboarded to that product鈥. The limited movement of tokens presents itself as a compelling factor for institutional buyers and fund boards evaluating the tokenised shared class.
As is the way with emerging technologies, tokenisation鈥檚 first great hurdle is education. Cousart highlights the importance of having leadership teams on board with what is being done with tokenisation, ensuring that the technology is understood before initiatives are launched. 鈥淵ou can鈥檛 just start developing the technology without answering to someone,鈥 he said.
Babcock shared this sentiment, adding that people on the DeFi side of things do not always share the same kind of level of expertise as someone from a TradFi-native firm, particularly when it comes to bespoke financial products. With the infrastructure and underwriting differing between the two, and the challenges stemming from that discrepancy, education becomes a key facet in advancing the scope of the technology.
The adoption of tokenisation is subject to the scrutiny of product acceptance and implementation processes. Tomenko highlighted that for tokenisation to be onboarded within a firm, it must go through risk, legal, technical, cybersecurity, and operational teams, which 鈥渃an take a couple of months to two years鈥. He shed light on the fact that, when firms bring in operational teams later in the approval cycle, the time frame for scalability becomes much longer.
Tomenko warned that the disparity between supply and demand volume 鈥 with 鈥渕any more early adopters on the demand side鈥 鈥 does not allow tokenisation to transition from its de facto pilot phase, and firms do not benefit from the full scale of efficiency, risk, and speed that they were anticipating.
Interoperability acting as a blockade to the widespread adoption of tokenisation was a shared sentiment among the panel. Not only do different DLT platforms have to be compatible with one another, but they must also function in tandem with legacy infrastructure to avoid siloed, fragmented liquidity.
The emergence of tokenisation presents an opportunity to take advantage of its theoretical benefits through regional regulatory frameworks.
The US, through its GENIUS Act, intends to solidify its position as market leader by providing onchain cash with the necessary legal clarity and providing it with its own regulatory classification, ensuring institutions are not violating securities laws. It has also explicitly permitted banks to issue tokenised deposits and circumnavigate the operational limitations associated with a regular deposit.
The UK, meanwhile, has been testing use cases for digital gilts through its pilot programme and has a clear roadmap for tokenised assets and the adoption of digital technology. The unified thinking between the Bank of England, Financial Conduct Authority, and Prudential Regulatory Authority presents itself as a compelling reason to select the region as a hub for future tokenisation projects, quelling fears of fragmented regulatory policy.
Conversely, the EU has taken a different approach to tokenisation, in that, unlike the US, it has chosen to regulate first, innovate later. Who can use the assets, how they are qualified, and who can issue them are all points that it views as necessary to establish before proceeding. This, in the view of the panellists, places the EU behind the US, allowing US dollar-pegged stablecoins to assert themselves as a dominant market force.
However, the European Central Bank鈥檚 central bank digital currency (CBDC) use case experiments have positioned it to benefit from the technology鈥檚 advantageous avenues, such as sharper intraday liquidity control and lower systemic risk, by processing repo transactions within the day using CBDCs as the cash leg, and tokenised securities on the other side.
For APAC, each country has its own distinct regulations, with Hong Kong and Singapore providing the greatest legal clarity. The lack of a general consensus means it functions as a double-edged sword: asset managers maintain reservations about expanding into the region due to the regulatory inconsistency, while simultaneously acknowledging the beneficial ability to experiment with tokenisation on a nation-to-nation basis.
Canada has seen the Canadian Securities Administrators approach tokenisation in a similar manner to its existing securities regulation, noted Van Wyk-Allan. Classifications of many crypto or tokenised assets are the same as their securities or derivatives counterparts, with normal securities-law levers often applied surrounding custody, client asset segregation, and risk management.
Alongside this, the Office of the Superintendent of Financial Institutions has consulted on how banks and insurers need to be treating crypto and tokenised exposures on their balance sheets, with the Bank of Canada working towards a more formal regulatory regime for Canadian-dollar-pegged stablecoins. When combined, this is an attractive package for securities finance teams looking to experiment with tokenisation on rails and a regulatory territory that is broadly familiar to them.
In the near future, the panellists anticipate tokenisation to move away from the proof of concept phase, and into one of real-world application and integration. They predict that, for the foreseeable future, tokenised assets will live 鈥渟ide by side鈥 with TradFi assets and technology, along with an increase in use cases stemming from the support of central banks and governments in promoting the usage of CBDCs.
The aforementioned increase in education is, in theory, going to lead to an evolution of the payments ecosystem. As leadership teams and executives learn what the technology has to offer, the scale of application will increase. The stablecoin market, for example, currently valued at approximately US$300 billion, did not exist just a few years ago, and is projected to reach US$2 trillion in the coming four years, according to certain studies noted by Cousart 鈥 demonstrating the potential for widespread adoption and promising returns.
Ultimately, the discussion at CASLA suggests that tokenisation鈥檚 future in securities finance will be defined by the rewiring of market infrastructure, away from the constraints of frantic 30-minute settlement windows, the atomic movement of collateral, coexisting TradFi and DeFi cash fund shares, and characterised by a regulatory shift.
Yet the panellists were fundamentally clear: without the less glamorous, but necessary, work of education, governance, interoperability, and consistent, clear legal frameworks, the scale they anticipate can not be facilitated.
North American repo
In this session, panellists looked towards the North American repo market, examining the US鈥檚 shift towards mandatory clearing, and what it means for market participants, in addition to discussing the implications of Canada鈥檚 market structure, documentation, fail fee regulations, and how they compare to and/or complement the US.
Panel moderator Shane Parks, director of securities finance business development at BNY, set the agenda, highlighting that the North American repo market serves as one of the foundational elements of the broader financial market infrastructure and continues to evolve. This evolution includes helping to enhance efficiency, balance sheet and collateral optimisation, market structure, resiliency, and risk intermediation.
Parks also noted there is no shortage of change to discuss in Canada, with firms seeing the development of triparty infrastructure and market modernisation. 鈥淎 lot of attention is increasingly focused on the SEC Treasury clearing mandate, and together, these developments are reshaping how market participants are thinking about access, liquidity, resilience, and the future structure of the repo market in North America,鈥 he explained.
Moving the discussion on to contextualise the Canadian market, Danny Auger, advisor, markets committees and initiatives at the Bank of Canada, told the audience that on a typical day, there are between CA$100 billion (US$70 billion) and CA$130 billion repo transactions in Canada 鈥 twice as large as it was five years ago. As well as this, attendees heard that the Canadian Overnight Repo Rate Average (CORRA) benchmark prior to T+1 was settling with volumes around CA$15 billion on average, which has now shifted closer to CA$35鈥40 billion on a daily basis.
Ryan Singh, director, collateral management and funding at Scotiabank, began to discuss the Canadian Collateral Management Service (CCMS) and Canadian triparty, stating that numerous people have tried to come to market with a triparty solution in Canada over the last few years.
鈥淭he evolution of triparty within the market has been a 鈥渂ook changer鈥, he said, especially now CCMS is integrating with e-trading platforms. 鈥淚t is a one-click solution that lets you trade and drive on.鈥 Broad adoption of CCMS could provide a significant lift in liquidity and collateral optimisation, especially once it is able to tap into liquidity that is typically not available or deployed in the repo market and as it grows to provide liquidity versus expanded collateral baskets.
Furthering the conversation to the Canadian Derivatives Clearing Corporation (CDCC), one panellist said that to attract broader adoption, it would take two major developments. Firstly, it would be regulatorily driven, similar to US mandatory clearing, driving more standardisation across both cash trading and the repo market.
Secondly, there is a market-driven aspect, as balance sheet and capital continue to be constraining factors to global financial institutions, they highlighted. 鈥淣aturally, there will be more activities being pointed to clearing,鈥 they noted.
With the Bank of Canada intending to join the CDCC in the future, there will be more supply of liquidity into the CDCC, meaning there will be demand for that income balance sheet, while also having the supply for additional repo transactions, such as overnight repo operations from the Bank of Canada, they added.
Moving the discussion to liquidity, one speaker answered the question: is there sufficient liquidity in the Canadian repo market?
Audiences heard that, in the speaker鈥檚 opinion, there is sufficient liquidity in the market, however, that does not mean that pricing will not widen out during pockets of pressure on balance sheets, something that is a function of a healthy repo market, to see price discrepancies during periods where there is more demand for liquidity.
The panellist noted that the market has gone through several years of quantitative tightening, and that has removed some structural liquidity that was injected during Covid from the system, and there are other policy tools that have been employed, such as the overnight repo operations, which provide temporary liquidity to the system, and that has helped the market digest and navigate what the appropriate methods.
Moving on to talk about fail-fee regulations and how they shape behaviour in the Canadian market, Singh noted that Canada is entering a trial period for fail fees, with the banks in consultation with Canadian Depository for Securities (CDS), it will start tracking fails within the system, generating reports, with participants then having to reconcile said reports with their own internal reporting. 鈥淭his means there is a lot of infrastructure to be built around the conceptual idea of fail fees in Canada as this is an insurance policy 鈥 there is no market driver to not settle trades,鈥 with Singh describing them as 鈥渙nly a needed incentive to settle trades in ultra-low rate environments鈥.
He added that the market is a way away from changing dealer behaviour, however in the next year, there will be a lot more data among the participants. 鈥淭he trial is going to go on for 18 months, and there is going to be a lot of feedback and pushback, however it will be illuminating for firms that do not actively track their fail fees and what it would amount to as a credit or debit, monthly and even daily accumulation.鈥
The US market is over US$10 trillion, predominantly composed of government bonds traded through various clearing and settlement mechanisms and collateral management agents, according to Travis Keltner, global head of secured financing at State Street. He noted that, organically, the market has recently grown by around 40 to 50 per cent of that, if not more.
Referencing former SEC Chair Gary Gensler, Keltner describes the mandate as a 鈥渕echanism for transparency and resiliency鈥 before saying there is a view it could create liquidity considering the new clearing access models launched. Despite the change in SEC commissioners, the mandate has held strong, rooted in a growing and sizable market that has evolved to promote liquidity through balance sheet benefits, notably leverage and capital, the audience heard.
鈥淲e are now on a path where the stake has been set, and now we are on this path to compliance, and it seems like there is no reversing course, at worst, maybe soften it to a degree, but I think it is largely going to stick,鈥 Keltner finished.
One speaker stated that the biggest hurdle with the mandate is time, highlighting there is a lot of work to be done before its implementation. They noted that a big challenge they face is the non-standardisation of legal documents, and so the Securities Industry and Financial Markets Association (SIFMA) at the end of 2024 released their master clearing agreement, which took a long time for buy side participants and banks to review and make their selections.
The panellist noted that what was found in practice is that not all market participants want to go the SIFMA route, meaning there are still a number of bespoke annexes in the market that people are trying to negotiate, which takes a lot of time for legal departments to compare and contrast between.
They detailed another challenge as being the fact there are unique risk factors that buy side participants care about that others might not care about. Because of this, there have been a lot of negotiation points between banks that may not have had the terms before. It was added that, on the plus side, there have been a number of organisations negotiating with different banks, with some of the terms becoming more standardised, meaning that, going forward, transactions will move much faster.
Concluding the panel, Park asked how market participants should ready themselves for the next phase of North American repo.
The answer is technology, according to Singh, who noted that Canada has often lagged behind its US peers in directing limited financial resources to innovation and upgrading legacy platforms.
Keltner stated that participants need to ensure they are positioned for compliance with the US mandate, while Auger commented that participants need to navigate the market to get to a position that they can provide their clients with an optimal service.
Equity focused panel
This panel, titled 鈥樷楬ot Takes鈥 Spur Conversation on the Future of Equity Lending鈥 covered the future of equity lending, underscoring key trends.
Discussing the current focus of the Canadian equity finance market, Mitch Bisnett, assistant vice president at State Street stated that, from a lender鈥檚 perspective, the current focus is on efficiency and collateral optimisation.
He highlighted: 鈥淐anada continues to be a reliable source of revenue and funding, but lacks the deep specials in the market like the US and UK. The market remains event-driven, such as corporate actions, index trading, and deal names.
鈥淥ne of the things driving the deal names is the consolidation in the energy and material sector due to historical high commodity prices, mutual funds, pension funds, sovereign wealth funds, which all continue to be reliable sources of supply, meaning they remain the main driver in the market is definitely the highly liquid market, and turning that inventory into balance sheet optimisation.鈥
Alexa Lemstra, director, account management at EquiLend, provided a data perspective, explaining that for the Canadian equities market, Q1 2026 revenues are up nine per cent year-over-year, something she notes is low compared to global trends, which are at around a 35 per cent revenue increase. She explained that the factors affecting Canadian revenue rankings include the decline in Canadian special markets, South Korea removing its short selling ban, and the war in Iran impacting global prices for companies in the energy sector.
From a broker鈥檚 point of view, Nicholas Murphy, associate director at National Bank Financial, said that balance sheets are always top of mind, noting that when balance sheet becomes constrained, collateral choice can determine whether a trade takes place. He also highlighted that there is an effort to use AI to drive productivity, improve efficiency, transform workflows, and to build new capabilities. Murphy furthered this point, saying that only a year ago, National Bank Financial was hardly using agentic coders, whereas now they are employing it much more frequently, describing it as 鈥渆xponentially increasing capabilities鈥.
Shifting the focus to equity as collateral, Murphy said that for him, it is really about using equities to help manage balance sheet, especially when cash or high-quality liquid assets (HQLAs) becomes constrained. 鈥淚 think the part that gets underestimated is the operational component. You cannot simply say we accept equity as collateral, you need infrastructure behind it, so you need well-defined eligibility schedules, standardised basket workflows, and the ability to adjust when the market moves.鈥
Bisnett explained that equity for equity is not a new concept, and lenders and brokers are very comfortable with using it where it is permitted. He notes that 15c-3 has shined a spotlight on it, as it allows brokers to pledge out of the US entities equity for equity, something he does not consider to be a massive structural shift in the market, as brokers have already been optimising their books globally.
Lemstra began to discuss the role fully paid lending (FPL) plays in reshaping the market, noting that it first emerged in late 2015 to 2020, with a meaningful increase in its acceleration in recent years. 鈥淚n March 2026, CIRO published their recommendations and guidance on fully paid lending and the regulation around that, meaning there is a much more codified and established regulation for Canadian fully paid assets, which I think will help to mature the industry.鈥
Murphy agreed that FPL is reshaping the Canadian market, despite being early in the process. He stated that, historically, securities lending in Canada relied on a concentrated supply source, but FPL is beginning to take a real step in expanding that supply base. 鈥淔rom my perspective, that is what is starting to reshape the market. It is still very name specific, but we are starting to see supply come from places it did not in the past.鈥
Looking towards where the industry is headed, Lemstra predicted a higher level of automation, as well as continued technological investment, as there will need to be infrastructure to handle modern applications. She also suggested that digital solutions such as DLT will become rife.
Bisnett agreed that automation is the future, stating it will become more responsive regarding intraday trading, however he does not see market dynamics shifting.
Concluding the panel, Murphy noted that AI will improve and usage will become increasingly prevalent, stating that the core business model will not change, but the way firms execute trades will. He predicts that the big shift will be tighter integration between analytics and execution. Instead of having insights on one system that act elsewhere, things will become more interconnected.
AI 鈥 from hype to workflow
The penultimate panel discussed the practical usage of AI on securities finance, with a focus on generative AI, machine learning, and genetic tools. Speakers also addressed the challenges new technology poses, as well as the importance of efficient AI applications.
Charles Engle, executive director, product innovation at J.P. Morgan, began by providing the audience with a definitional foundation of AI. 鈥淎I has meant so many things over the past few years 鈥 it is such a catch-all term,鈥 he highlighted, before underscoring that the securities finance industry uses AI with a defined set of rules.
He noted the evolution of AI, saying: 鈥淣owadays, it is not just about having a task, or picking up text or an email, but also picking up data from contracts, and we had to consider how to pull that data and how to implement machine learning into it.鈥
According to Engle, generative and agentic AI is where data is transforming, and users should ensure they have guardrails as an authentication later to keep their AI in control.
Furthering the discussion on the evolution of AI tools, Sivaskanthan Jegatheswaran, director, Global Securities 麻豆影视传媒 at National Bank of Canada Capital Markets, said today鈥檚 leading frontier models, including Gemini, Claude, and ChatGPT, are increasingly capable across a broad range of tasks, particularly in software development.
However, he argued that the real value lies less in the underlying model than in the application layer through which it is deployed, notably the data it can access, the permissions it is granted, and the domain expertise embedded within it. Jegatheswaran added that as AI adoption accelerates within organisations, firms will increasingly develop, customise and fine-tune tools that align closely with their workflows and strategic priorities.
Panel moderator Nick Delikaris, chief product officer at EquiLend, mentioned that as recently as six months ago, the industry was discussing AI use cases that were still either prototypes, in their testing phases, or cursory back office functions. He posed the question: what was the catalyst behind the evolution?
Nathaniel Lindsay, vice president, head of electronic trading, agency securities lending, State Street, responded: 鈥淎 significant portion of automated decision-making in securities finance today is still driven by symbolic AI, such as rule-based systems, that mimic human intelligence by executing rigid 鈥業f-Then鈥 statements. However, we have seen increased use of predictive AI, including machine learning, across trading desks in the past five years and more recently, generative AI. Importantly, predictive AI is being deployed alongside, rather than in place, of interpretable rule-based systems and statistical pricing models.鈥
According to Lindsay, the confluence of relatively straightforward statistical modelling and rule-based logic with predictive AI provides explainability and mathematical rigor while incorporating forward-looking views into pricing and inventory management strategies.
Lindsay emphasised the 鈥渆xplosion鈥 of generative AI. 鈥淚f we look at the last 12 to 18 months, generative AI has been deployed across a majority of the world鈥檚 largest enterprises 鈥 but the dispersion of capabilities is still quite high.
鈥淎t the lowest tier, a firm may have an internally-built chatbot adapted from a pre-trained and relatively less powerful open weight model, whereas the more sophisticated end of the spectrum is deploying Anthropic鈥檚 Claude, OpenAI鈥檚 ChatGPT, or other frontier models within their organisations. I believe that most firms are somewhere in the middle, using Microsoft Copilot or similar products to help accelerate productivity.鈥
He added: 鈥淭here is a common misconception that companies can simply deploy generative AI into an organisation and expect immediate, meaningful productivity gains. While this is somewhat true for programming-heavy roles, the reality is different for the rest of the workforce. Generative AI is a productivity enabler, but without deliberately reinventing roles and operating models to harness its potential, enterprise-wide transformation remains elusive. This is the truly difficult part that the world鈥檚 institutions are sorting through.鈥
Shifting the conversation to the benefits of AI, Engle emphasised the productivity and workflow aspect, noting that a number of institutions have rolled out their own tools to help employees do their jobs more quickly and efficiently. The audience heard that it is being further integrated, with firms looking to make it a part of their businesses. He noted that he has been focusing on AI in his role, looking at collateral eligibility, and how to translate a set of terms in a system or contract into the core collateral management system without having to understand or interpret a system to use it.
鈥淲e are just scratching the surface on this now, and it is going to get even more exciting.鈥
At State Street, Lindsay noted that the organisation has seen success with GitHub Copilot in terms of increasing the productivity of technical staff such as software engineers and quants, while Databricks Genie has been a useful tool for less technical employees to interact with data.
He also highlighted the strong partnership between Agency Lending and State Street Associates, the academic research division of State Street Markets. The Electronic Trading team 鈥 embedded within Agency Lending Trading 鈥 gains access to leading academic institutions such as Harvard and MIT, while collaborating with State Street Associates鈥 AI and Trading Analytics team to design and implement predictive models for securities lending demand, short squeezes, and more 鈥 鈥渂ringing theory to practice鈥.
Concluding the panel by discussing the challenges AI poses, Lindsay raised the issue of cybersecurity and how much access organisations, especially regulated banks, can give to their internal tooling, APIs, workflows, and knowledge databases. 鈥淭hose are the aspects that are going to unlock the intelligence of AI, but I have not seen a plan for any organisation regarding how to deal with the cybersecurity issue. That is a bottleneck that needs to be addressed.鈥
Engle noted that training new talent in the industry is made harder through the introduction of AI, as many junior tasks are given to AI. He also emphasised the issue of data security and ensuring there are no breaches.
Associations update
Kicking off the conference on Canadian securities lending, panellists gathered to provide updates from their associations, and look to the year ahead.
Looking back over the past 12 months, Fran Garritt, CEO of International Securities Lending Association (ISLA) Americas, noted that much of their recent work has been on regulatory change and the move into implementation.
He highlighted that they have worked with members of the association and regulators to get the implementation deadline of the US Securities and Exchange Commission鈥檚 (SEC鈥檚) 10c-1a pushed out, and they are beginning to work with members to advocate for certain points within 10c-1.
One other key focus he detailed was on operational resiliency, lending itself to a discussion around cyber risk, interoperability, and, at a high level, ensuring that securities lending markets continue to function in a safe and transparent way.
Garritt stated that the association is also spending an increasing amount of time helping members to navigate market fragmentation within the US, but also across markets such as Brazil and Mexico.
Daniel Austin, head of US markets policy and regulation at the Alternative Investment Management Association (AIMA), commented that over the last 10 months, AIMA has been engaging heavily with the SEC on modernising SEC Rule 105 to make it more fit for purpose to reflect the dramatic growth in overnight and one-day secondary offerings. He explained that an updated Rule will further the SEC鈥檚 goal of facilitating capital formation.
Ina Budh-Raja, CEO of ISLA, explained that the association is operating through four key execution pillars: advocacy and regulatory strategy, legal services, market structure and digital, and events and communications. It is through these pillars that the association is focused on delivering member value.
In relation to advocacy initiatives generally, ISLA has been working to address regulatory change impacting the securities finance industry. A part of the association鈥檚 role is to advocate for regulation that is proportionate, promotes growth and liquidity, while also preventing inadvertent negative consequences.
She highlighted the significant, current focus on capital efficiency, particularly in the light of the US Basel reproposals, as well as recent progress in the market in developing capital efficiency tools, for example, the central counterparty (CCP) model.
Budh-Raja stated that, from a public policy perspective, the focus on jurisdictional growth and innovation is a key driver for policymakers, which may lead to cross-regional fragmentation, driven by local competitiveness agendas.
Regarding the growth in retail lending, particularly through neobrokers, she noted that ISLA is engaged with this sector and is working on developing best practice guidance to encourage this growth sector to adopt established frameworks and standards, to ensure regulatory expectations are met, such as in relation to regulatory treatment of underlying retail clients, asset safety, and transparency on costs and charges.
Shifting the discussion to the future, Garritt noted that in January 2026, he had four overarching goals, one being advocacy. He said that ISLA Americas is currently in the middle of responding to Basel III Endgame, with the hope that the Federal Reserve will provide clarity on bankruptcy remote protection (referred to as pledge).
The second goal was to focus on developing markets, with working groups focused on Brazil, Mexico, and the Nuam market including Chile, Colombia, and Peru.
Brazil is currently the most active market, Garritt said, and he hopes that by the end of the year, the association will receive further clarity regarding how the market is going to open, especially as the country seeks to move to T+1 in 2028; meaning that having a functioning securities lending market will be helpful.
The third goal for the year is continuing to bring the industry together through events and working groups.
Fourth and finally, he aims to create further alignment with ISLA in creating a global brand and offering, to ensure member firms are seeing the value of the association.
Discussing the year ahead, Budh-Raja spoke about the current regulatory change agenda in Europe, stating their association is advocating for harmonisation, particularly on the beneficial owner and tax side across the region, where there is fragmentation across 27 states. She also mentioned active advocacy for recognition of pledged collateral arrangements for Undertakings for Collective Investment in Transferable Securities (UCITS).
She highlighted the move to T+1 for the UK and Europe in 2027 and the consensus-driven best practice being developed continuously by ISLA in collaboration with the market, which the market can now begin to use when looking at implementation and testing.
Further, she emphasised the benefits of the collaborative relationship between ISLA and CASLA, highlighting areas of advocacy, training and events, where partnership with peer associations have been extremely effective. She also reiterated that the ambition of ISLA when establishing its affiliate entity, ISLA Americas, in 2024, was to strengthen the advocacy voice for the industry, by building a local presence regionally.
Moving the conversation to regulation, Austin noted AIMA鈥檚 challenge to the SEC鈥檚 2023 rules on securities lending and short selling.
Last August, the US Court of Appeals for the Fifth Circuit remanded the rules to the SEC, directing it to consider and quantify the cumulative economic impact of the rules, holding that the Commission failed to consider the economic impact the short sale rule would have on the securities lending rule when they were promulgated in tandem and adopted concurrently on the same day. Despite this direction from the court, the Commission has not produced the economic analysis.
According to Austin, the association鈥檚 primary concern with the securities lending rule is that because of the granular, loan-by-loan reporting framework, there is a heightened risk that sensitive position or flow information will leak into the market and cause commercial harm.
Tokenisation鈥檚 future in securities finance
During this panel, experts gathered to discuss the role of tokenisation in the securities finance market and beyond.
The speakers 鈥 Will Babcock, director of structured products, banking, at Cantor Fitzgerald, Cale Newhouse, product manager at BNY, Fabrice Tomenko, head of digital trust at Clearstream, and Robert Cousart, US head of product and platform, cash management at BlackRock 鈥 delved into the real-world applications of tokenisation.
The session 鈥 moderated by Claire Van Wyk-Allan, director of business development, prime brokerage at TD Securities 鈥 offered the audience insight into how tokenisation has transitioned from concept to practical infrastructure for institutional markets.
Tokenisation, in essence, is the modernisation of the operational rails behind the assets, and within the discussion, the panellists set out to answer a simple but multi-faceted question: why does it matter?
For Babcock, a key benefit of tokenisation is connecting onchain liquidity with yield-bearing structured and fixed income products, utilising DeFi as more efficient funding for credit. The majority of stablecoins, he said, are 鈥渮ero per cent yield-bearing, and if you look on the traditional finance side of the world, that doesn鈥檛 really happen鈥.
Tomenko shares this perspective. He underscored the significance of risk and inefficiency in cross-border securities lending and collateral, viewing tokenisation as a mechanism to 鈥渟olve these problems鈥 through its ability to 鈥渞epresent the ownership of securities on a platform which can change its ownership 24/7鈥. Significantly, he added that tokenisation has the potential to alleviate exposure during cross-border swaps and tight intraday margining.
Cousart, in keeping with his area of expertise, views tokenisation through the lens of cash management and corporate payments. Corporations are moving money around within a plethora of different sub-accounts, which he describes as a 鈥渕anual process鈥 involving 鈥渓ots of reconciliation鈥. Distributed ledger technology (DLT), and the assets that it enables 鈥 specifically stablecoins 鈥 have the potential to automate time-consuming processes and improve efficiency.
He also sheds light on the uptake in the number of firms bringing public funds to market and utilising tokenisation technology 鈥 including BlackRock, J.P. Morgan, Fidelity, WisdomTree, and Franklin Templeton 鈥 implying that the industry recognises its potential value.
24/7 Settlement and tokenisation, said Newhouse, may improve the extreme settlement concentration that occurs within the 鈥渇irst 30 minutes of a trading day鈥 in US Treasuries. He believes that both TradFi and DeFi interoperability enhancements are needed to achieve genuine always-on markets, and that tokenised assets are 鈥減articularly well suited鈥 for this fundamental upgrade. The relatively small US Treasury settlement window of today forces decision-makers to plan the next 24 hours 鈥 鈥渁 long time鈥 in today鈥檚 financial markets.
This concentrated settlement forces banks into a position where they must pre-fund cash and, in essence, hold it on their balance sheets. An incremental improvement in efficiency, driven by tokenisation, would act as a net benefit to institutions operating within these windows.
The emergence and evolution of onchain markets have fostered an open-source lending environment that is more capital efficient than its TradFi counterpart. Babcock highlights the fact that a BBB-rated security can be bought and potentially pledged to DeFi lending protocols 鈥 such as Aave 鈥 effectively repo financing onchain.
The combination of programmable liquidation and deep onchain liquidity has changed investors鈥 perception of collateral risk when compared to some traditional assets.
Cousart sees smart contracts as a 鈥渨alled garden鈥 where tokens can 鈥渙nly be sent to certain digital wallets that are onboarded to that product鈥. The limited movement of tokens presents itself as a compelling factor for institutional buyers and fund boards evaluating the tokenised shared class.
As is the way with emerging technologies, tokenisation鈥檚 first great hurdle is education. Cousart highlights the importance of having leadership teams on board with what is being done with tokenisation, ensuring that the technology is understood before initiatives are launched. 鈥淵ou can鈥檛 just start developing the technology without answering to someone,鈥 he said.
Babcock shared this sentiment, adding that people on the DeFi side of things do not always share the same kind of level of expertise as someone from a TradFi-native firm, particularly when it comes to bespoke financial products. With the infrastructure and underwriting differing between the two, and the challenges stemming from that discrepancy, education becomes a key facet in advancing the scope of the technology.
The adoption of tokenisation is subject to the scrutiny of product acceptance and implementation processes. Tomenko highlighted that for tokenisation to be onboarded within a firm, it must go through risk, legal, technical, cybersecurity, and operational teams, which 鈥渃an take a couple of months to two years鈥. He shed light on the fact that, when firms bring in operational teams later in the approval cycle, the time frame for scalability becomes much longer.
Tomenko warned that the disparity between supply and demand volume 鈥 with 鈥渕any more early adopters on the demand side鈥 鈥 does not allow tokenisation to transition from its de facto pilot phase, and firms do not benefit from the full scale of efficiency, risk, and speed that they were anticipating.
Interoperability acting as a blockade to the widespread adoption of tokenisation was a shared sentiment among the panel. Not only do different DLT platforms have to be compatible with one another, but they must also function in tandem with legacy infrastructure to avoid siloed, fragmented liquidity.
The emergence of tokenisation presents an opportunity to take advantage of its theoretical benefits through regional regulatory frameworks.
The US, through its GENIUS Act, intends to solidify its position as market leader by providing onchain cash with the necessary legal clarity and providing it with its own regulatory classification, ensuring institutions are not violating securities laws. It has also explicitly permitted banks to issue tokenised deposits and circumnavigate the operational limitations associated with a regular deposit.
The UK, meanwhile, has been testing use cases for digital gilts through its pilot programme and has a clear roadmap for tokenised assets and the adoption of digital technology. The unified thinking between the Bank of England, Financial Conduct Authority, and Prudential Regulatory Authority presents itself as a compelling reason to select the region as a hub for future tokenisation projects, quelling fears of fragmented regulatory policy.
Conversely, the EU has taken a different approach to tokenisation, in that, unlike the US, it has chosen to regulate first, innovate later. Who can use the assets, how they are qualified, and who can issue them are all points that it views as necessary to establish before proceeding. This, in the view of the panellists, places the EU behind the US, allowing US dollar-pegged stablecoins to assert themselves as a dominant market force.
However, the European Central Bank鈥檚 central bank digital currency (CBDC) use case experiments have positioned it to benefit from the technology鈥檚 advantageous avenues, such as sharper intraday liquidity control and lower systemic risk, by processing repo transactions within the day using CBDCs as the cash leg, and tokenised securities on the other side.
For APAC, each country has its own distinct regulations, with Hong Kong and Singapore providing the greatest legal clarity. The lack of a general consensus means it functions as a double-edged sword: asset managers maintain reservations about expanding into the region due to the regulatory inconsistency, while simultaneously acknowledging the beneficial ability to experiment with tokenisation on a nation-to-nation basis.
Canada has seen the Canadian Securities Administrators approach tokenisation in a similar manner to its existing securities regulation, noted Van Wyk-Allan. Classifications of many crypto or tokenised assets are the same as their securities or derivatives counterparts, with normal securities-law levers often applied surrounding custody, client asset segregation, and risk management.
Alongside this, the Office of the Superintendent of Financial Institutions has consulted on how banks and insurers need to be treating crypto and tokenised exposures on their balance sheets, with the Bank of Canada working towards a more formal regulatory regime for Canadian-dollar-pegged stablecoins. When combined, this is an attractive package for securities finance teams looking to experiment with tokenisation on rails and a regulatory territory that is broadly familiar to them.
In the near future, the panellists anticipate tokenisation to move away from the proof of concept phase, and into one of real-world application and integration. They predict that, for the foreseeable future, tokenised assets will live 鈥渟ide by side鈥 with TradFi assets and technology, along with an increase in use cases stemming from the support of central banks and governments in promoting the usage of CBDCs.
The aforementioned increase in education is, in theory, going to lead to an evolution of the payments ecosystem. As leadership teams and executives learn what the technology has to offer, the scale of application will increase. The stablecoin market, for example, currently valued at approximately US$300 billion, did not exist just a few years ago, and is projected to reach US$2 trillion in the coming four years, according to certain studies noted by Cousart 鈥 demonstrating the potential for widespread adoption and promising returns.
Ultimately, the discussion at CASLA suggests that tokenisation鈥檚 future in securities finance will be defined by the rewiring of market infrastructure, away from the constraints of frantic 30-minute settlement windows, the atomic movement of collateral, coexisting TradFi and DeFi cash fund shares, and characterised by a regulatory shift.
Yet the panellists were fundamentally clear: without the less glamorous, but necessary, work of education, governance, interoperability, and consistent, clear legal frameworks, the scale they anticipate can not be facilitated.
North American repo
In this session, panellists looked towards the North American repo market, examining the US鈥檚 shift towards mandatory clearing, and what it means for market participants, in addition to discussing the implications of Canada鈥檚 market structure, documentation, fail fee regulations, and how they compare to and/or complement the US.
Panel moderator Shane Parks, director of securities finance business development at BNY, set the agenda, highlighting that the North American repo market serves as one of the foundational elements of the broader financial market infrastructure and continues to evolve. This evolution includes helping to enhance efficiency, balance sheet and collateral optimisation, market structure, resiliency, and risk intermediation.
Parks also noted there is no shortage of change to discuss in Canada, with firms seeing the development of triparty infrastructure and market modernisation. 鈥淎 lot of attention is increasingly focused on the SEC Treasury clearing mandate, and together, these developments are reshaping how market participants are thinking about access, liquidity, resilience, and the future structure of the repo market in North America,鈥 he explained.
Moving the discussion on to contextualise the Canadian market, Danny Auger, advisor, markets committees and initiatives at the Bank of Canada, told the audience that on a typical day, there are between CA$100 billion (US$70 billion) and CA$130 billion repo transactions in Canada 鈥 twice as large as it was five years ago. As well as this, attendees heard that the Canadian Overnight Repo Rate Average (CORRA) benchmark prior to T+1 was settling with volumes around CA$15 billion on average, which has now shifted closer to CA$35鈥40 billion on a daily basis.
Ryan Singh, director, collateral management and funding at Scotiabank, began to discuss the Canadian Collateral Management Service (CCMS) and Canadian triparty, stating that numerous people have tried to come to market with a triparty solution in Canada over the last few years.
鈥淭he evolution of triparty within the market has been a 鈥渂ook changer鈥, he said, especially now CCMS is integrating with e-trading platforms. 鈥淚t is a one-click solution that lets you trade and drive on.鈥 Broad adoption of CCMS could provide a significant lift in liquidity and collateral optimisation, especially once it is able to tap into liquidity that is typically not available or deployed in the repo market and as it grows to provide liquidity versus expanded collateral baskets.
Furthering the conversation to the Canadian Derivatives Clearing Corporation (CDCC), one panellist said that to attract broader adoption, it would take two major developments. Firstly, it would be regulatorily driven, similar to US mandatory clearing, driving more standardisation across both cash trading and the repo market.
Secondly, there is a market-driven aspect, as balance sheet and capital continue to be constraining factors to global financial institutions, they highlighted. 鈥淣aturally, there will be more activities being pointed to clearing,鈥 they noted.
With the Bank of Canada intending to join the CDCC in the future, there will be more supply of liquidity into the CDCC, meaning there will be demand for that income balance sheet, while also having the supply for additional repo transactions, such as overnight repo operations from the Bank of Canada, they added.
Moving the discussion to liquidity, one speaker answered the question: is there sufficient liquidity in the Canadian repo market?
Audiences heard that, in the speaker鈥檚 opinion, there is sufficient liquidity in the market, however, that does not mean that pricing will not widen out during pockets of pressure on balance sheets, something that is a function of a healthy repo market, to see price discrepancies during periods where there is more demand for liquidity.
The panellist noted that the market has gone through several years of quantitative tightening, and that has removed some structural liquidity that was injected during Covid from the system, and there are other policy tools that have been employed, such as the overnight repo operations, which provide temporary liquidity to the system, and that has helped the market digest and navigate what the appropriate methods.
Moving on to talk about fail-fee regulations and how they shape behaviour in the Canadian market, Singh noted that Canada is entering a trial period for fail fees, with the banks in consultation with Canadian Depository for Securities (CDS), it will start tracking fails within the system, generating reports, with participants then having to reconcile said reports with their own internal reporting. 鈥淭his means there is a lot of infrastructure to be built around the conceptual idea of fail fees in Canada as this is an insurance policy 鈥 there is no market driver to not settle trades,鈥 with Singh describing them as 鈥渙nly a needed incentive to settle trades in ultra-low rate environments鈥.
He added that the market is a way away from changing dealer behaviour, however in the next year, there will be a lot more data among the participants. 鈥淭he trial is going to go on for 18 months, and there is going to be a lot of feedback and pushback, however it will be illuminating for firms that do not actively track their fail fees and what it would amount to as a credit or debit, monthly and even daily accumulation.鈥
The US market is over US$10 trillion, predominantly composed of government bonds traded through various clearing and settlement mechanisms and collateral management agents, according to Travis Keltner, global head of secured financing at State Street. He noted that, organically, the market has recently grown by around 40 to 50 per cent of that, if not more.
Referencing former SEC Chair Gary Gensler, Keltner describes the mandate as a 鈥渕echanism for transparency and resiliency鈥 before saying there is a view it could create liquidity considering the new clearing access models launched. Despite the change in SEC commissioners, the mandate has held strong, rooted in a growing and sizable market that has evolved to promote liquidity through balance sheet benefits, notably leverage and capital, the audience heard.
鈥淲e are now on a path where the stake has been set, and now we are on this path to compliance, and it seems like there is no reversing course, at worst, maybe soften it to a degree, but I think it is largely going to stick,鈥 Keltner finished.
One speaker stated that the biggest hurdle with the mandate is time, highlighting there is a lot of work to be done before its implementation. They noted that a big challenge they face is the non-standardisation of legal documents, and so the Securities Industry and Financial Markets Association (SIFMA) at the end of 2024 released their master clearing agreement, which took a long time for buy side participants and banks to review and make their selections.
The panellist noted that what was found in practice is that not all market participants want to go the SIFMA route, meaning there are still a number of bespoke annexes in the market that people are trying to negotiate, which takes a lot of time for legal departments to compare and contrast between.
They detailed another challenge as being the fact there are unique risk factors that buy side participants care about that others might not care about. Because of this, there have been a lot of negotiation points between banks that may not have had the terms before. It was added that, on the plus side, there have been a number of organisations negotiating with different banks, with some of the terms becoming more standardised, meaning that, going forward, transactions will move much faster.
Concluding the panel, Park asked how market participants should ready themselves for the next phase of North American repo.
The answer is technology, according to Singh, who noted that Canada has often lagged behind its US peers in directing limited financial resources to innovation and upgrading legacy platforms.
Keltner stated that participants need to ensure they are positioned for compliance with the US mandate, while Auger commented that participants need to navigate the market to get to a position that they can provide their clients with an optimal service.
Equity focused panel
This panel, titled 鈥樷楬ot Takes鈥 Spur Conversation on the Future of Equity Lending鈥 covered the future of equity lending, underscoring key trends.
Discussing the current focus of the Canadian equity finance market, Mitch Bisnett, assistant vice president at State Street stated that, from a lender鈥檚 perspective, the current focus is on efficiency and collateral optimisation.
He highlighted: 鈥淐anada continues to be a reliable source of revenue and funding, but lacks the deep specials in the market like the US and UK. The market remains event-driven, such as corporate actions, index trading, and deal names.
鈥淥ne of the things driving the deal names is the consolidation in the energy and material sector due to historical high commodity prices, mutual funds, pension funds, sovereign wealth funds, which all continue to be reliable sources of supply, meaning they remain the main driver in the market is definitely the highly liquid market, and turning that inventory into balance sheet optimisation.鈥
Alexa Lemstra, director, account management at EquiLend, provided a data perspective, explaining that for the Canadian equities market, Q1 2026 revenues are up nine per cent year-over-year, something she notes is low compared to global trends, which are at around a 35 per cent revenue increase. She explained that the factors affecting Canadian revenue rankings include the decline in Canadian special markets, South Korea removing its short selling ban, and the war in Iran impacting global prices for companies in the energy sector.
From a broker鈥檚 point of view, Nicholas Murphy, associate director at National Bank Financial, said that balance sheets are always top of mind, noting that when balance sheet becomes constrained, collateral choice can determine whether a trade takes place. He also highlighted that there is an effort to use AI to drive productivity, improve efficiency, transform workflows, and to build new capabilities. Murphy furthered this point, saying that only a year ago, National Bank Financial was hardly using agentic coders, whereas now they are employing it much more frequently, describing it as 鈥渆xponentially increasing capabilities鈥.
Shifting the focus to equity as collateral, Murphy said that for him, it is really about using equities to help manage balance sheet, especially when cash or high-quality liquid assets (HQLAs) becomes constrained. 鈥淚 think the part that gets underestimated is the operational component. You cannot simply say we accept equity as collateral, you need infrastructure behind it, so you need well-defined eligibility schedules, standardised basket workflows, and the ability to adjust when the market moves.鈥
Bisnett explained that equity for equity is not a new concept, and lenders and brokers are very comfortable with using it where it is permitted. He notes that 15c-3 has shined a spotlight on it, as it allows brokers to pledge out of the US entities equity for equity, something he does not consider to be a massive structural shift in the market, as brokers have already been optimising their books globally.
Lemstra began to discuss the role fully paid lending (FPL) plays in reshaping the market, noting that it first emerged in late 2015 to 2020, with a meaningful increase in its acceleration in recent years. 鈥淚n March 2026, CIRO published their recommendations and guidance on fully paid lending and the regulation around that, meaning there is a much more codified and established regulation for Canadian fully paid assets, which I think will help to mature the industry.鈥
Murphy agreed that FPL is reshaping the Canadian market, despite being early in the process. He stated that, historically, securities lending in Canada relied on a concentrated supply source, but FPL is beginning to take a real step in expanding that supply base. 鈥淔rom my perspective, that is what is starting to reshape the market. It is still very name specific, but we are starting to see supply come from places it did not in the past.鈥
Looking towards where the industry is headed, Lemstra predicted a higher level of automation, as well as continued technological investment, as there will need to be infrastructure to handle modern applications. She also suggested that digital solutions such as DLT will become rife.
Bisnett agreed that automation is the future, stating it will become more responsive regarding intraday trading, however he does not see market dynamics shifting.
Concluding the panel, Murphy noted that AI will improve and usage will become increasingly prevalent, stating that the core business model will not change, but the way firms execute trades will. He predicts that the big shift will be tighter integration between analytics and execution. Instead of having insights on one system that act elsewhere, things will become more interconnected.
AI 鈥 from hype to workflow
The penultimate panel discussed the practical usage of AI on securities finance, with a focus on generative AI, machine learning, and genetic tools. Speakers also addressed the challenges new technology poses, as well as the importance of efficient AI applications.
Charles Engle, executive director, product innovation at J.P. Morgan, began by providing the audience with a definitional foundation of AI. 鈥淎I has meant so many things over the past few years 鈥 it is such a catch-all term,鈥 he highlighted, before underscoring that the securities finance industry uses AI with a defined set of rules.
He noted the evolution of AI, saying: 鈥淣owadays, it is not just about having a task, or picking up text or an email, but also picking up data from contracts, and we had to consider how to pull that data and how to implement machine learning into it.鈥
According to Engle, generative and agentic AI is where data is transforming, and users should ensure they have guardrails as an authentication later to keep their AI in control.
Furthering the discussion on the evolution of AI tools, Sivaskanthan Jegatheswaran, director, Global Securities 麻豆影视传媒 at National Bank of Canada Capital Markets, said today鈥檚 leading frontier models, including Gemini, Claude, and ChatGPT, are increasingly capable across a broad range of tasks, particularly in software development.
However, he argued that the real value lies less in the underlying model than in the application layer through which it is deployed, notably the data it can access, the permissions it is granted, and the domain expertise embedded within it. Jegatheswaran added that as AI adoption accelerates within organisations, firms will increasingly develop, customise and fine-tune tools that align closely with their workflows and strategic priorities.
Panel moderator Nick Delikaris, chief product officer at EquiLend, mentioned that as recently as six months ago, the industry was discussing AI use cases that were still either prototypes, in their testing phases, or cursory back office functions. He posed the question: what was the catalyst behind the evolution?
Nathaniel Lindsay, vice president, head of electronic trading, agency securities lending, State Street, responded: 鈥淎 significant portion of automated decision-making in securities finance today is still driven by symbolic AI, such as rule-based systems, that mimic human intelligence by executing rigid 鈥業f-Then鈥 statements. However, we have seen increased use of predictive AI, including machine learning, across trading desks in the past five years and more recently, generative AI. Importantly, predictive AI is being deployed alongside, rather than in place, of interpretable rule-based systems and statistical pricing models.鈥
According to Lindsay, the confluence of relatively straightforward statistical modelling and rule-based logic with predictive AI provides explainability and mathematical rigor while incorporating forward-looking views into pricing and inventory management strategies.
Lindsay emphasised the 鈥渆xplosion鈥 of generative AI. 鈥淚f we look at the last 12 to 18 months, generative AI has been deployed across a majority of the world鈥檚 largest enterprises 鈥 but the dispersion of capabilities is still quite high.
鈥淎t the lowest tier, a firm may have an internally-built chatbot adapted from a pre-trained and relatively less powerful open weight model, whereas the more sophisticated end of the spectrum is deploying Anthropic鈥檚 Claude, OpenAI鈥檚 ChatGPT, or other frontier models within their organisations. I believe that most firms are somewhere in the middle, using Microsoft Copilot or similar products to help accelerate productivity.鈥
He added: 鈥淭here is a common misconception that companies can simply deploy generative AI into an organisation and expect immediate, meaningful productivity gains. While this is somewhat true for programming-heavy roles, the reality is different for the rest of the workforce. Generative AI is a productivity enabler, but without deliberately reinventing roles and operating models to harness its potential, enterprise-wide transformation remains elusive. This is the truly difficult part that the world鈥檚 institutions are sorting through.鈥
Shifting the conversation to the benefits of AI, Engle emphasised the productivity and workflow aspect, noting that a number of institutions have rolled out their own tools to help employees do their jobs more quickly and efficiently. The audience heard that it is being further integrated, with firms looking to make it a part of their businesses. He noted that he has been focusing on AI in his role, looking at collateral eligibility, and how to translate a set of terms in a system or contract into the core collateral management system without having to understand or interpret a system to use it.
鈥淲e are just scratching the surface on this now, and it is going to get even more exciting.鈥
At State Street, Lindsay noted that the organisation has seen success with GitHub Copilot in terms of increasing the productivity of technical staff such as software engineers and quants, while Databricks Genie has been a useful tool for less technical employees to interact with data.
He also highlighted the strong partnership between Agency Lending and State Street Associates, the academic research division of State Street Markets. The Electronic Trading team 鈥 embedded within Agency Lending Trading 鈥 gains access to leading academic institutions such as Harvard and MIT, while collaborating with State Street Associates鈥 AI and Trading Analytics team to design and implement predictive models for securities lending demand, short squeezes, and more 鈥 鈥渂ringing theory to practice鈥.
Concluding the panel by discussing the challenges AI poses, Lindsay raised the issue of cybersecurity and how much access organisations, especially regulated banks, can give to their internal tooling, APIs, workflows, and knowledge databases. 鈥淭hose are the aspects that are going to unlock the intelligence of AI, but I have not seen a plan for any organisation regarding how to deal with the cybersecurity issue. That is a bottleneck that needs to be addressed.鈥
Engle noted that training new talent in the industry is made harder through the introduction of AI, as many junior tasks are given to AI. He also emphasised the issue of data security and ensuring there are no breaches.
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