Under the Federal Reserve’s Regulation T, a security can be loaned at a minimum of 100% of its value for a permissible purpose. The purposes are to cover shorts, assure settlements or to loan to another.
Prime brokers offer a variety of services to investors, from providing credit to clearing trades. One important service offered is known as Securities Lending. In Part One of this article, we’ll look at the contractual and collateral rules pertaining to Securities Lending.
As an investor or hedge fund, you may wish to borrow shares for a variety of reasons, such as shorting the stock or hedging a long position. An executed Securities Lending Agreement is the documentation required before shares are loaned. Continue reading “Securties Lending, Part One” »