“Take no action” borrow: Difference between revisions
Amwelladmin (talk | contribs) Created page with "{{a|gmsla|}}In a normal stock borrow {{gmslaprov|Lender}}s can elect against {{gmslaprov|Borrower}} on {{gmslaprov|Loaned Securities}} — see for example, Paragraph {{gms..." |
Amwelladmin (talk | contribs) No edit summary |
||
| Line 1: | Line 1: | ||
{{a|gmsla|}}In a normal [[stock borrow]] {{gmslaprov|Lender}}s can elect against {{gmslaprov|Borrower}} on {{gmslaprov|Loaned Securities}} — see for example, Paragraph {{gmslaprov|6.7}} of the {{gmsla}}. | {{a|gmsla|}}In a normal [[stock borrow]] {{gmslaprov|Lender}}s can elect against {{gmslaprov|Borrower}} on {{gmslaprov|Loaned Securities}} — see for example, Paragraph {{gmslaprov|6.7}} of the {{gmsla}}. | ||
===Example=== | |||
As an example, {{gmslaprov|Borrower}} borrows {{gmslaprov|Securities}} in [[Teldar Paper]] from {{gmslaprov|Lender}}. {{gmslaprov|Teldar Paper}} announces a tender for 20% of the company. The final allocation of the tender is announced at 30%. {{gmslaprov|Lender}} closes out 30% of {{gmslaprov|Borrower}}’s position at the tender price. This is called being “held liable”. | |||
An alternative is the [[“take no action” borrow]], where the {{gmslaprov|Lender}} promises to the {{gmslaprov|Borrower}} that they will not be “held liable” — i.e., the {{gmslaprov|Lender}} won’t exercise its rights receive equivalent cash and assets from participating in the [[corporate event]]. | |||
===Benefits=== | |||
{{gmslaprov|Lender}}s offer [[TNA borrows]] at a much higher fee than standard borrows — fair enough, as they are giving up the right to participate in the corporate action, which might be priced attractively. On the other hand the {{gmslaprov|Borrower}} can participate in the benefits the corporate action without taking any of the risk associated with it — they can eventually give the shares back after all. | |||
{{sa}} | |||
*{{gmslaprov|Corporate actions}} under the {{gmsla}} | |||
Revision as of 17:09, 30 June 2020
In a normal stock borrow Lenders can elect against Borrower on Loaned Securities — see for example, Paragraph 6.7 of the 2010 GMSLA.
Example
As an example, Borrower borrows Securities in Teldar Paper from Lender. Teldar Paper announces a tender for 20% of the company. The final allocation of the tender is announced at 30%. Lender closes out 30% of Borrower’s position at the tender price. This is called being “held liable”.
An alternative is the “take no action” borrow, where the Lender promises to the Borrower that they will not be “held liable” — i.e., the Lender won’t exercise its rights receive equivalent cash and assets from participating in the corporate event.
Benefits
Lenders offer TNA borrows at a much higher fee than standard borrows — fair enough, as they are giving up the right to participate in the corporate action, which might be priced attractively. On the other hand the Borrower can participate in the benefits the corporate action without taking any of the risk associated with it — they can eventually give the shares back after all.
See also
- Corporate actions under the 2010 GMSLA