# The Hoopp Model

Source audio: `audio\raw\the-hoopp-model.mp3`
Compressed audio: `audio\compressed\the-hoopp-model.mp3`
Model: `large-v3`
Language: `en`

[00:00:00.000] Hi, everybody. This is Peter Bassler, and we are back with another episode of Peer Connections,
[00:00:05.120] the podcast series for the Global Peer Financing Association, otherwise known as GPFA. Today,
[00:00:10.420] we are here to talk to the Healthcare of Ontario Pension Plan, also known as HOOP, with Rob
[00:00:15.700] Gooby and Steve Anderson. And I've known Rob for 15 years. He's a good friend. So they
[00:00:20.880] are considered one of the most sophisticated and unique players in this space. So we're
[00:00:25.740] excited to hear from them. Now we're going to pass it off to Steve Anderson to talk about
[00:00:29.980] the evolution and the history of securities financing at Hoop. Steve, welcome.
[00:00:34.320] Thanks very much, Peter. I joined Hoop in 2006. It's interesting. I had a bit of a varied
[00:00:38.640] background. It was one of the reasons I got the job. I had a derivative background having traded
[00:00:43.000] precious metal and FX options at Scotia in a prior job. And I had actually been the repo
[00:00:48.560] trader and funding and liquidity at Avian Amro Bank in the late 90s. So I had a little bit of
[00:00:52.920] everything. I'd also traded some FX. So I was a bit of a jack of all trades, master of none,
[00:00:57.180] so to speak. And that really helped me get my job at Hoop as coming into work in the equity
[00:01:01.780] derivatives because we were a big derivative shop and also start up the funding and liquidity. We
[00:01:06.960] didn't have a repo program at all at Hoop at the time. So I was tasked with starting up the repo
[00:01:11.420] program. When I first arrived at Hoop, the first time I went to do a repo trade, I was working off
[00:01:16.100] sheets of papers that had our positions from our custodian that were three days old. So I had to
[00:01:21.500] call up the custodian before I did a repo trade to make sure we actually had the bonds still with us
[00:01:25.860] and they hadn't been lent out by the custodian. And then it was up to Rob in the middle office
[00:01:30.480] trying to figure out how we were actually going to book these things since our system couldn't
[00:01:33.580] handle the sell buyback because it treated it as an outright sale. So we were trying to figure out
[00:01:38.060] how to book these things and how to account for them and whatnot. So it was a bit of a mess.
[00:01:41.920] And so where we are today versus where we were then, now we've got a world-class collateral
[00:01:45.820] management system with straight through processing of repo trades. And it's just incredible to me
[00:01:50.660] where we've come from where we were when I first joined. And on the SEC lending side,
[00:01:54.600] We were borrowers of Canadian stocks mainly at the time against some of long swap positions.
[00:01:59.240] It was a bit of a finance trade that we'd use to raise cheap cash.
[00:02:02.720] We were actually posting Canadian government bonds against borrowing equities and paying
[00:02:06.980] about seven basis points for the privilege at the time, which didn't make sense, but
[00:02:10.620] we were sort of beholden to our limited amount of counterparties and where they were prepared
[00:02:14.260] to do the trade.
[00:02:15.620] So we were quite lucky at Hoop.
[00:02:17.220] I think there was a bit of a foresight on the part of Jim Cohane, and maybe we got a
[00:02:20.460] little bit lucky where he recognized after the global financial crisis, that collateral management
[00:02:25.340] and funding and liquidity, which the office is a little dark corner and nobody paid much attention
[00:02:29.920] to it until Lehman collapsed and the various ramifications of that. And so Jim actually hired
[00:02:35.240] Rob into the front office to basically start up a SEC lending and collateral business, which we
[00:02:39.620] were sort of doing already, but it was more kind of a utilitarian function. It wasn't really something
[00:02:43.980] we looked at as a way to generate alpha at the time until Rob came along. And really one of the
[00:02:49.020] first things that Rob did, which was extremely important to how this business has evolved and
[00:02:53.580] put us in the tremendous competitive advantage position that we have today. One of the first
[00:02:57.700] things he did was worked for years and years and years on expanding our list of counterparties and
[00:03:03.600] our legal agreements, which take forever to get done. And that obviously gave us an outlet of
[00:03:08.800] different places. For example, in that Canadian stock trade I just talked about, we didn't have
[00:03:12.660] to just go to the Canadian banks. We would go to other counterparties that were happy to give us
[00:03:16.300] stock and we would actually get paid for that upgrade trade. We were giving Canadian bonds or
[00:03:19.940] whatever collateral we were giving and we were borrowing the stock. So this evolution from me
[00:03:24.380] looking at a couple of pieces of paper to try and figure out how to book a repo trade to where we
[00:03:28.720] are today, a lot of it, the foresight of Jim hiring Rob and then Rob's dogged determination
[00:03:33.720] over a number of years to expand our list of counterparties and the technology, Rob coming
[00:03:39.080] from a back office, middle office function, recognized the importance of managing that
[00:03:43.560] collateral and knowing exactly where the collateral is at all time. And the value of that collateral
[00:03:48.260] on a relative basis was extraordinarily important. So Rob spent a number of years building up
[00:03:53.400] relationships in the industry, getting the legal agreements. And truly, those are the two main
[00:03:58.400] things that really spurred us on to where we are today. And I think a global leader in the
[00:04:03.000] SEC lending and collateral business. And Rob truly is an innovator in that space.
[00:04:07.860] That was great, Steve. Thanks for that background. And Rob, maybe you want to pick it up from there
[00:04:12.280] and talk a little bit about where you guys are today
[00:04:14.100] and how you're looking at things.
[00:04:15.480] I know it's quite unique
[00:04:16.560] when you think about most of your peers.
[00:04:19.080] Thanks, Peter.
[00:04:19.640] I joined Hoop in 2000.
[00:04:21.600] Unlike Steve's background,
[00:04:22.760] my background has been always in operations.
[00:04:25.180] Steve came out from ABN Ambrose
[00:04:26.880] and he was really into the trading side of the business.
[00:04:30.160] I had the good fortunes of working in the back office
[00:04:32.060] from 1993, so a number of years.
[00:04:35.400] I worked for several banks.
[00:04:36.780] I worked for Templeton, HSBC, Bank of Trust, Deutsche Bank,
[00:04:41.000] and eventually landed at Hoopak.