Lending at a Premium

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Lending at a premium

A loan from one broker to another of securities to cover a customer's short position, with a borrowing fee included. A fee is unusual since securities are normally lent freely between brokers.

A loan of a security between two brokers where the lending broker charges a fee to the other. Lending at a premium occurs to cover the cost of the short sale of the security by a client. It is not common to lend at a premium (most brokers lend securities to each other for free as a courtesy); it primarily occurs for illiquid securities.

lending at a premium

The imposition of an extra fee when securities are lent by one broker to another to cover a customer's short sale. Although lending at a premium is fairly unusual, it may occur when a particular security is difficult to borrow.

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