Frequently Asked Questions
Q: What is the LSTA?
A: The Loan Syndications and Trading Association is the trade association for corporate lending and loan trading, dedicated to advancing the interests of the marketplace as a whole.
Our mission is to promote liquidity and transparency, foster education and communication, and set standards for the corporate lending and loan trading markets through a range of activities designed to promote just and equitable marketplace principles.
Q: What does the LSTA do?
A: The LSTA provides the necessary leadership for promoting confidence and growth in the floating rate corporate loan asset class. In addition, the LSTA develops policies and fair market practices for corporate lending and loan trading.
The LSTA serves the syndicated loan market by developing services and voluntary standards that increase liquidity.
Q: How did the LSTA get started?
A: In July of 1995, a questionnaire was distributed to fifteen major international financial institutions asking if they believed a standard settlement period was needed for loan trades. All fifteen institutions responded in the affirmative.
In December of 1995, this same group of loan traders pooled their resources in order to form an Association in an effort to develop standard settlement and operational procedures, market practices and other mechanisms to trade the increasing volume of par and distressed bank debt more efficiently. As a result, the LSTA was formed.
Q: How does the LSTA serve the loan market?
A: The LSTA promotes transparency, fosters education and communication, and sets standards for the corporate lending and loan trading market. We do this through:
The LSTA has developed more than three-dozen standardized documents - each of which reduces the time and complexity of negotiating issues related to trading and syndicating the loan asset. This reduces the time it takes to document and settle loan trades and enables the market to focus on trading activity itself.
In 1996, we began collecting and disseminating dealer quotes on 155 actively traded loans. Today, the LSTA collects quotes on approximately 2,500 U.S. loan facilities on a daily basis.
This "service" was created because of a resounding cry in the market. In 1996, there were only 32 institutional investors that purchased loans. By the end of 2001, there were 213 institutional investor type vehicles that invested in the asset class. Many of these investors are mutual funds that sell to the retail investor market. As a result, they are required to mark their portfolios to market. Prior to our dealer quote service; there was no platform where these funds could obtain any sort of secondary prices on corporate loans.
In 1999, we moved our Market-to-Market (MTM) Pricing to a buy-side driven business, thereby dramatically increasing the number of loans on which we obtained quotes, and encouraging more institutional investors to the loan market.
The S&P / LSTA Leveraged Loan Index (LLI) was launched in October 2001. It is a total return index that captures accrued interest, repayments, and market value changes. The LLI represents a broad cross section of leveraged loans syndicated in the United States, including dollar-denominated loans to overseas issuers.
The LLI, on a real-time basis, tracks the current outstanding balances and spreads over LIBOR for fully funded term loans in which at least several of the market's largest investors participate. Here's a sample of the LLI's highlights:
Weekly total return benchmark
Historical returns back to January 1997
Pricing from LSTA / LPC Mark-to-Market
Real time current spreads & outstandings provided by cohort of institutional investors
Includes over 470 facilities and $107 billion in outstandings, which is 70% of the institutional universe
Comparable to the S&P 500's coverage of equities
BB and B indices also available
American Banker will publish charts and stats on a regular basis beginning January 2002
In 2002 for the first time in the loan market, the LSTA collected trade data.
Today, the LSTA is on track with the production of its fifth annual First Quarter Trade Data Study, which compares actual trade levels to LSTA/LPC Mark-to-Market (MTM) indicative price levels. The LSTA is pleased to announce that as of press time a number of additional institutions have signed on to be a part of this year's initiative.
In 2006, the frequency of the study will increase from annually to quarterly in an effort to provide more frequent insight into the accuracy and integrity of indicative secondary prices. As a result, the study will now produce official LSTA quarterly trade volume figures moving forward, and will begin to monitor and analyze trade settlement times for both par and distressed credits.
Loan Market Conference
The LSTA has the industry's largest and most successful annual conference that reaches nearly 1300 individuals representing more than 200 institutions.
The LSTA has formed the following committees and working groups:
Legal Advisory Committee
Primary Market and Agent Transfer Practices Committee
Trade Practices and Forms Committee
U.S. Japan Committee
Working Groups of the LSTA
Cross-Border Distressed Working Group
FAS 140 Working Group
MNPI Sell-Side Working Group
MNPI Buy-Side Working Group
Proceeds Letter Working Group
Splash Page Working Group
New Working Groups
CDO Working Group
Delayed Compensation Working Group
Distressed Participation Agreement Working Group
Loan-Only Credit Derivatives Working Group
Master Confidentiality Agreement Working Group
Moody's Working Group
Operations Working Group