However, if cash is given as collateral, the lender is obliged to reinvest the cash and ‘rebate’ an agreed proportion of the reinvestment return back to the borrower. The borrower pays a fee to the lender for the use of the loaned security. The collateral in securities lending can be either other securities or cash (securities lending against cash collateral looks very much like repo). Similarly, the other party is called the borrower, even if he is taking legal title to the security. The first party is called the lender, even though he is transferring legal title to the other party. In a securities lending transaction in the international market, as in repo, one party gives legal title to a security or basket of securities to another party for a limited period of time, in exchange for legal ownership of collateral (although it is also possible for the collateral to be pledged and there are still uncollateralized securities loans). ![]() The two types of instrument have many similarities and can often be used as functional substitutes for each other. Securities lending, like repo, is a type of securities financing transaction (SFT).
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |