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Stock loan: Difference between revisions
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{{ | {{a|glossary|}}A strange beast. Actually a type of financing transaction, though it is clothed it the language of [[buy]] and [[sell]]. | ||
===Why?=== | ===Why?=== | ||
Start out with what it is ''for''. Let’s say a well-meaning [[hedge fund]] wants to bet against the price of a security. It does that by “[[short selling]]”. The key economic feature of a short sale is that you sell a security you don’t own in the first place. If you own it and sell it — well, that’s just a sale. | Start out with what it is ''for''. Let’s say a well-meaning [[hedge fund]] wants to bet against the price of a security. It does that by “[[short selling]]”. The key economic feature of a short sale is that you sell a security you don’t own in the first place. If you own it and sell it — well, that’s just a sale. | ||
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Therefore the [[stock loan]] itself isn’t a market transaction. No one goes [[on risk]] to the stock by entering into a [[stock loan]]. the {{gmslaprov|Borrower}} goes on risk by subsequently selling the stock it has borrowed. | Therefore the [[stock loan]] itself isn’t a market transaction. No one goes [[on risk]] to the stock by entering into a [[stock loan]]. the {{gmslaprov|Borrower}} goes on risk by subsequently selling the stock it has borrowed. | ||
===Does a stock loan count as [[borrowed money]]?=== | ===Does a [[stock loan]] count as [[borrowed money]]?=== | ||
According to Simon Firth on derivatives, [[Borrowed money|no]]. Nor does a [[repo]]. | According to Simon Firth on derivatives, [[Borrowed money|no]]. Nor does a [[repo]]. | ||