Template:Securities lending capsule

Under a securities loan or stock loan, a “lender” transfers securities to a “borrower” in return for the borrower’s promise to return equivalent securities to the lender at a future date or on the lender’s request, or at the borrower’s option. In return, the borrower provides agreed collateral to the lender equal to the value of the borrowed securities. If the value of the borrowed securities rises, the borrower must provide more collateral (and if it falls, the borrower may ask for some of the collateral back). The lender keeps market exposure to the the borrowed securities at all times: the borrower only has to return what it has borrowed, even if it has fallen in value. Therefore, stock loans are used to short-sell securities.