Trillion Dollar Stock Lending Platform EquiLend Suffers Security Breach

Jan 24, 2024

EquiLend is the latest high-profile financial institution to face the full brunt of ever-growing cybersecurity risk. The fintech firm, which processes close to $2.4 trillion of securities lending transactions every month, was the subject of a cybersecurity attack that shut down its operations early in the week. The attack came just days after the firm announced the completion of a sale of its private equity firm.

EquiLend Security Breach

Partly owned by some of the biggest lending firms, including JPMorgan, Morgan Stanley, and Goldman Sachs, EquiLend was established in 2001. It specializes in offering a standardized and central global platform for trading and post-trade services.

Its technology also supports all facets of securities finance, including electronic trading, order management, post-trade, analytics, and regulations. It currently boasts a client base of over 200 asset owners, agency lending banks, broker-dealers, and hedge funds. In addition to facilitating short sales, the company operates a lending platform that was the subject of the cyberattacks.

The company identified the security breach on January 22 after a portion of its system went offline. The security breach entailed unauthorized access to its systems. However, the amount of damage caused or the amount of money lost in the attack is still unclear. EquiLend has since taken the necessary steps to secure the system and restore the services to normal working conditions.

While EquiLend is working with external cybersecurity firms to address the issue, it has advised its clients that the problem could take several days to resolve fully. It is a significant setback for an entity that plays a crucial role in transactions that take place on Wall Street. Its securities lending business is a considerable business that draws in various Wall Street banks trading units.

Most hedge funds rely on EquiLend to borrow shares that they can use to short sales of companies that they expect their values to fall. As of the end of September, Goldman Sachs had used the company to loan about $55 billion of securities for use in short sale trades. Employing over 300 employees, EquiLend offers a centralized platform for trading and post-trade services.

EquiLend Sale

The security breach comes at the height of reports the lending trading platform owned by ten major Wall Street firms could be acquired by equity firm Welsh Carson, Anderson & Stowe (WCAS). Reports indicate WCAS has agreed to acquire a minority stake in the firm for an undisclosed amount.

The firm has also committed close to $200 million in investment to support organic growth initiatives and acquisitions. According to CEO Brian Lamb, the partnership with WCAS will help propel the business to new heights. It should also help the company do more than ever within securities finance.

Last year, EquiLend was forced to enter a plea and settle charges brought by US public pension funds. The settlement was in relation to accusations that it facilitated market collusions by its owners. As part of the settlement, JPMorgan, Goldman Sachs, Morgan Stanley, and USB agreed to pay $499 to settle the charges collectively.

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