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{{a|gmsla|}}In a normal [[stock borrow]] {{gmslaprov|Lender}} | {{a|gmsla|}}In a normal [[stock borrow]], a {{gmslaprov|Lender}} can require the {{gmslaprov|Borrower}} to [[Manufacturing|manufacture]] the effect of participation in a [[corporate action]] that takes place on the {{gmslaprov|Loaned Securities}} — see for example, Paragraph {{gmslaprov|6.7}} of the {{gmsla}}. Of course, the Lender can (and usually would) just recall the securities, but there are times where everything happens a bit quickly. | ||
===Example=== | ===Example=== | ||
Let’s say {{gmslaprov|Borrower}} borrows {{gmslaprov|Securities}} in [[Teldar Paper]] from {{gmslaprov|Lender}}. [[Teldar Paper|Teldar]] 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 | An alternative is the [[“take no action” borrow]], where the {{gmslaprov|Lender}} promises to keep the {{gmslaprov|Loan}} out over the period of the {{gmslaprov|corporate action}}, but also promises to the {{gmslaprov|Borrower}} that it will not be “held liable” — i.e., the {{gmslaprov|Lender}} won’t exercise its rights receive {{gmslaprov|Equivalent}} cash and assets from participating in the [[corporate event]]. | ||
===Benefits=== | ===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. | {{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. |