Securities Lending: Difference between revisions
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The process of lending out a [[securities]], either [[bonds]] or [[shares]], and commonly documented under a {{gmsla}}, in the case of shares, a {{gmra}} in the case of bonds, or a Prime Brokerage Agreement in the case of a [[Hedge Fund]]. Notwithstandning the nomenclature, securities lending is usually achieved by means of title transfer - a | {{g}}The process of lending out a [[securities]], either [[bonds]] or [[shares]], and commonly documented under a {{gmsla}}, in the case of shares, a {{gmra}} in the case of bonds, or a Prime Brokerage Agreement in the case of a [[Hedge Fund]]. | ||
Notwithstandning the nomenclature, securities lending is usually achieved by means of title transfer - a “sale and repurchase”, in other words. This leads to certain important legal considerations which you will find explored at greater depth in the anatomies referenced below. | |||
Why would you borrow a security? To short-sell it, in a nutshell. By borrowing and then selling it you fix a price for the security (in the sale) but keep the exposure to that security, because you also have to return it to the lender to close out your loan. If the price drops after you sell it, when you come to buy it back to close out the loan, you have made a profit. | |||
===See Also=== | ===See Also=== | ||
*[[GMSLA Anatomy]] | *[[GMSLA Anatomy]] | ||
*[[GMRA Anatomy]] | *[[GMRA Anatomy]] | ||
Latest revision as of 05:45, 23 October 2019
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The process of lending out a securities, either bonds or shares, and commonly documented under a 2010 GMSLA, in the case of shares, a Global Master Repurchase Agreement in the case of bonds, or a Prime Brokerage Agreement in the case of a Hedge Fund.
Notwithstandning the nomenclature, securities lending is usually achieved by means of title transfer - a “sale and repurchase”, in other words. This leads to certain important legal considerations which you will find explored at greater depth in the anatomies referenced below.
Why would you borrow a security? To short-sell it, in a nutshell. By borrowing and then selling it you fix a price for the security (in the sale) but keep the exposure to that security, because you also have to return it to the lender to close out your loan. If the price drops after you sell it, when you come to buy it back to close out the loan, you have made a profit.