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Margin lending: Difference between revisions
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{{ | {{aai|pb|{{image|Margin loan lifecycle|png|A blueprint for [[margin lending]], yesterday}}'''As defined in [[SFTR]]'''{{subtable|{{SFTR 3(10)}}}}<br>}}{{d|Margin lending|/ˈmɑːʤɪn ˈlɛndɪŋ/|n|}} | ||
{{margin loan}} | |||
This is the classic [[prime brokerage]] trade. I’m a [[hedge fund]], and I am all about [[vega|Vega]] — the [[Greeks|Greek]] that denotes [[leverage]].<ref>“My name is [[Vega]]. I live on the second floor. I live upstairs from you. Yes, I think you’ve seen me before.” — [[Vega|Suzanne Luca]]</ref> | This is the classic [[prime brokerage]] trade. I’m a [[hedge fund]], and I am all about [[vega|Vega]] — the [[Greeks|Greek]] that denotes [[leverage]].<ref>“My name is [[Vega]]. I live on the second floor. I live upstairs from you. Yes, I think you’ve seen me before.” — [[Vega|Suzanne Luca]]</ref> | ||
How do I get my spectacular returns? | How do I get my spectacular returns? {{strike|Alpha|Leverage}}, that’s how. I buy securities “[[Margin lending transaction - SFTR Provision|on margin]]”. This means ''I'' buy the security, and ''you'', dear [[prime broker]], pay for it. | ||
Well, strictly speaking, you lend me the funds I need so I can pay for it, but in practice, you will be settling the transaction directly with the [[executing broker]] and taking delivery of the security on my behalf, under our [[margin loan]]. That’s right: in return for lending me the money, you get to “look after” the shares for me, so you can both (i) take [[security]] over them to secure the loan, and (ii) [[reuse]] those shares — usually using them as collateral when you borrow treasuries in the stock loan market which you can give to your treasury department to offset the funding costs they charged you to to finance the [[margin loan]] you made to me in the first place. | Well, strictly speaking, you lend me the funds I need so I can pay for it, but in practice, you will be settling the transaction directly with the [[executing broker]] and taking delivery of the security on my behalf, under our [[margin loan]]. That’s right: in return for lending me the money, you get to “look after” the shares for me, so you can both (i) take [[security]] over them to secure the loan, and (ii) [[reuse]] those shares — usually using them as collateral when you borrow treasuries in the stock loan market which you can give to your treasury department to offset the funding costs they charged you to to finance the [[margin loan]] you made to me in the first place. | ||
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Easy. | Easy. | ||
{{sa}} | {{sa}} | ||
*[[Prime brokerage transactions]] | |||
*[[Prime brokerage]] | *[[Prime brokerage]] | ||
*[[Rehypothecation]] | *[[Rehypothecation]] | ||
*[[Greeks]] | *[[Greeks]] | ||
{{ref}} | {{ref}} | ||
{{newsletter|5/2/2021}} | |||