Exploiting A New Volatility Indicator

This research report examines a new type of volatility indicator derived from the securities lending market. The securities lending volatility indicator measures the variation of rates charged to borrow securities; average weighted by the outstanding shares being transacted. After this raw value is aggregated, we apply a proprietary formula to normalize the data.

The underlying securities lending transactional dataset provided to Tidal Markets contains over 16 billion shares of outstanding securities loans daily, spanning over 5,000 securities.

Within this report we examine the securities lending volatility of US equities. We back test securities lending volatility to nearly 8 years of historical stock price data, from January 2014 to October 2021.

We compare securities lending volatility to stock price volatility. We analyze how volatility has changed throughout the years. We assess securities lending volatility against the performance of stock price returns. Finally, we analyze securities lending volatility against stock price returns over varying lengths of time.