Securities Lending

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Securities Lending

The act of loaning a stock, derivative, or other security to an investor or firm. Securities lending requires the borrower to put up collateral, whether cash, security, or a letter of credit. The completion of this transaction requires a securities lending agreement, which states, among other things, how long the loan lasts, what fee the lender receives, and the amount and type of collateral. Securities lending is important to short selling, in which an investor borrows securities in order to immediately sell them. The advantage of securities lending to the borrower is the fact that he/she may profit from shorting the securities; the advantage to the lender is the fee (and, if the borrower fails to repay, the collateral).
References in periodicals archive ?
Participating in stock lending programs, digital distribution and best execution are other ways to continue to bring down costs for investors.
Roelof van der Struik, Investment Manager Treasury Trading & Commodities at PGGM, said: At PGGM, we believe by connecting to Eurex Clearing, using the full capabilities of EquiLend, the CCP model enables new stock lending structures and business opportunities for beneficial owners as well as helping to manage the rising burden of balance sheet regulation and costs for the securities lending market.
Analysts say FTSE's and MSCI's decisions will rest on whether foreign investors feel the current level of opening is sufficient, given the 49 per cent foreign ownership limits and investor qualification requirements; in addition, some of the market framework changes such as stock lending and short-selling have yet to be tested.
Because many issuers of physically backed ETFs lend the investors' stock out to other stock lending desks to be used by professional market participants to settle short trades or to arbitrage market anomalies.
Banks are alleged to have used EquiLend, a stock lending platform they own, to 'prevent participants from accessing marketplaces where they could benefit from direct, all-to-all trading and thereby secure themselves the best prices.
Aspects of market infrastructure such as the establishment of a custodian, making provisions for short selling, stock lending and developing products such as exchange traded funds (ETFs) and hedge funds are also areas that require attention.
A broad range of other initiatives is on schedule, such as the introduction of a T+2 settlement cycle, the launch of a junior market for SMEs, stock lending and derivatives trading.
The paper also considers additional information that may be provided by activity in the Brazilian stock lending market, as a determinant of trading activity in the spot stock market.
The TWSE has already introduced policies regarding stock lending by brokers.
During the period, the SCA took several measures including regulations for delivery-versus-payment, securities custodian, margin trading, short selling, stock lending and capital increase through rights issue.
569% Assicurazioni Generali stake was subject to hedging transaction and related stock lending activity.
Kym Marcel Martins Ardison and Luciana de Andrade Costa bring Nash to "talk" by means of an approach to game theory in the paper entitled a Game Theory approach to Stock lending transactions in the Brazilian Stock market.