The new process is designed to meet the needs of large pension funds, mutual funds and other major investors including online custodians, says Old Mutual.

Calpers and eSecLending have successfully held their first auction by telephone, during which they beta tested the Web site software. Based on this early experience, Calpers believes it can nearly double the annual return it has previously earned from its securities lending activities. Investment management firms within the Old Mutual family of companies are expected to join Calpers in subsequent auctions.

Calpers, a minority partner in eSecLending, is the largest public pension fund in the US. Other large pension funds will be invited to participate in subsequent online auctions, says Old Mutual.

ESecLending says it auction system will aim to:
* bring together lenders, borrowers and brokers in one place via the web;
* allow price discovery by utilising a multiple-stage bidding process and offering lendable securities packaged in discrete tranches; and
* capture a large centralised pool of data on securities lending performance that will be used for a comprehensive benchmarking system.

"Securities lending currently takes place in a very inefficient marketplace," says Ty Danco, president of eSecLending. "We intend to change this through an auction process that offers clear benefits to lenders and borrowers."

Agents such as large custodian banks have historically served as middlemen in securities lending, taking a negotiated portion of the income generated in the lending process. The size of the securities lending market is estimated at between $1.5 trillion and $2 trillion worldwide.