Sec Lending Agreements

Securities lenders, often referred to simply as dry lenders, are institutions that have access to “loanable” securities. These may be asset managers with a large number of securities, custodian banks holding third-party securities, or third-party lenders who automatically access securities through the asset holder`s deposit bank. The international securities lending trade organization is the International Securities Lending Association. According to a survey carried out in June 2004, its members had 5.99 billion euros in securities for the granting of loans. In the United States, the Risk Management Association publishes quarterly surveys of its (U.S.) members. As of June 2005, they had $5.77 billion in securities. Other interprofessional organizations are the Australian Securities Lending Association (ASLA), the Canadian Securities Lending Association (CASLA), the Pan Asia Securities Lending Association (PASLA) and the South African Securities Lending Association (SASLA). Securities lending is important for short selling in which an investor borrows securities and sells them immediately. The borrower hopes to take advantage of this by selling the guarantee and later buying it back at a lower price. As the property has been temporarily transferred to the borrower, the borrower is required to pay dividends to the lender. In these transactions, the lender is compensated in the form of agreed fees and has also repaid the guarantee at the end of the transaction. This allows the lender to increase its returns by obtaining these fees.

The borrower benefits from the opportunity to make a profit by reducing the securities. The loan of securities is the act of lending to an investor or an investment company. The loan of securities is conditional on the borrower setting up guarantees, whether cash, guarantees or letters recommended. When a security is lent, the title and ownership are also transferred to the borrower. Securities lending is legally and clearly regulated in most major global securities markets. Most markets require that securities be borrowed only for specifically eligible purposes, which generally implies that > Following the collapse of the principal debtor Lehman Brothers, market participants have had to attend liquidation processes in real life.