CIBC Mellon, Northern Trust, RBC Dexia and State Street Corp. have formed the Canadian Securities Lending Association (CASLA) to advocate on behalf of all securities lending market participants in Canada, the companies said Monday.

CASLA seeks to enhance the public’s understanding of securities lending, encourage the adoption of best practices and work with regulators and other industry associations to ensure an efficient and secure marketplace. CASLA will advocate for the common interests of securities lending market participants, including custodian banks, beneficial owners, asset managers and broker-dealers.

“This is a major step forward in the continuing development of the Canadian securities lending market,” said the founding members in a joint statement. “We are pleased that our industry now has a collective voice in Canada and will continue to develop strong linkages with similar global associations.”

The four founding companies account for more than 90% of the Canadian securities lending market.

“Securities lending plays an integral role in today’s financial markets by providing greater liquidity, more efficient price discovery and opportunities for institutional investors to earn additional portfolio income,” says Rob Chiuch, executive director and head of trading at CIBC Mellon. “CASLA will work with all market participants to encourage the adoption of global best practices, enhance market transparency and ensure the long-term viability of securities lending in Canada.”

Other securities lending associations around the world include the Australian Securities Lending Association (ASLA), International Securities Lending Association (ISLA) in Europe, Pan Asian Securities Lending Association (PASLA) and the Risk Management Association (RMA) in the U.S.

CASLA will canvas industry firms and professionals for membership in the near future, and will hold elections for executive positions in 2010. Participants in the beneficial owner and borrower and lender communities are encouraged to join.

“CASLA will work directly with Canadian regulators and stakeholders on issues that are relevant to its members,” says Dave Sedman, manager, global securities lending at The Northern Trust Co., Canada Branch. “As a local organization, CASLA will develop solutions that are suited to Canada’s legal and regulatory framework, and make sense for this marketplace.”

The securities lending market in Canada has been active for several years. In securities lending transactions, beneficial owners such as mutual funds, pension funds and other institutional investors lend securities to borrowers often through intermediaries such as custodian banks. At year-end 2008, the Canadian industry had $886 billion available for lending and $119 billion on loan according to U.K.-based Data Explorers.

IE