Reuse - PB Provision: Difference between revisions
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Amwelladmin (talk | contribs) Created page with "{{anat|pb}} {{pbprov|Reuse}} — often, though misguidedly, labeled {{pbprov|rehypothecation}} — is the right a {{pbprov|prime broker}} has over its clients {{pbprov|custody..." |
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{{pbprov|Reuse}} — often, though misguidedly, labeled {{pbprov|rehypothecation}} — is the right a {{pbprov|prime broker}} has over its | {{pbprov|Reuse}} — often, though misguidedly, labeled {{pbprov|rehypothecation}} — is the right a {{pbprov|prime broker}} has over its client’s {{pbprov|custody assets}} to take those assets and sell them in the market to offset its lending costs, against an obligation to return equivalent assets (which it must buy in the market) when the client wants them back. | ||
It is a fundamental part of the prime brokerage business. This is how a {{pbprov|prime broker}} manages its costs of lending to funds to buy the assets: it is ''not'' a credit risk mitigation technique (for that see {{pbprov|security}} and {{pbprov|margin}}. | |||
Revision as of 11:20, 26 February 2018
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Prime Brokerage Anatomy™
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Reuse — often, though misguidedly, labeled rehypothecation — is the right a prime broker has over its client’s custody assets to take those assets and sell them in the market to offset its lending costs, against an obligation to return equivalent assets (which it must buy in the market) when the client wants them back.
It is a fundamental part of the prime brokerage business. This is how a prime broker manages its costs of lending to funds to buy the assets: it is not a credit risk mitigation technique (for that see security and margin.