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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.


To pledge securities as collateral for a loan when the same securities have already been pledged for another loan. Generally speaking, a brokerage rehypothecates when it needs to secure a loan for a client. That is, the client pledges securities for a loan on a margin account and the brokerage uses those same securities to procure a loan from a bank to finance the loan for the client.


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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the pledged collateral is not owned by these firms, but due to rehypothecation rights, these firms are legally allowed to use the collateral in their own name" (Singh, Aitken, 2010, p.
In consequence, rehypothecation has been one of the dominant drivers of the financial crisis of 2007-2008 and the 2011 failure of MF Global (Maurin, 2015).
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12) Rehypothecation refers to the practice of an institution lending securities that its clients have pledged as collateral.
Second, from the contractual perspective, transactions are often embedded with certain credit rating downgrade triggers requiring the posting of additional collateral or imposing more constraining restrictions on rights of rehypothecation.
With respect to levels of rehypothecation, we draw upon the example of Lehman Brothers to illustrate the magnitude of contraction in a case that ultimately ended in bankruptcy and liquidation.
principles, initially focusing on rehypothecation, a distortion whose
practice known as rehypothecation, (2) caused a type of intermediary
Deleveraging after Lehman: Evidence from Reduced Rehypothecation.