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Margin lending: Difference between revisions
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{{a|sftr| | {{a|sftr|{{SFTR 3(10)}}<br>}}{{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> | |||
How do I get my spectacular returns? <s>[[Alpha]]</s> [[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 to pay for it, but in practice you settle the transaction directly with the [[executing broker]] and you take delivery of the security on my behalf. For, in return for your loan, I let you look after the security for me, whereby you can (A) have a [[security interest]] over it to secure your loan, and (B) you can [[rehypothecate]] it into the market to defray your funding costs of providing me the loan in the first place. | How do I get my spectacular returns? <s>[[Alpha]]</s> [[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 to pay for it, but in practice you settle the transaction directly with the [[executing broker]] and you take delivery of the security on my behalf. For, in return for your loan, I let you look after the security for me, whereby you can (A) have a [[security interest]] over it to secure your loan, and (B) you can [[rehypothecate]] it into the market to defray your funding costs of providing me the loan in the first place. | ||