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Rehypothecation

   Also found in: Legal, Wikipedia 0.01 sec.
Rehypothecation
Pledging to banks by securities brokers of the amount in customers' margin account as collateral for broker loans, which are used to cover margin loans to customers for margin purchases and selling short.

Rehypothecation. Rehypothecation occurs when your broker, to whom you have hypothecated -- or pledged -- securities as collateral for a margin loan, pledges those same securities to a bank or other lender to secure a loan to cover the firm's exposure to potential margin account losses.

When you open a margin account, you typically sign a general account agreement with your broker, in which you authorize your broker to rehypothecate.



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