Securities Lenders, Borrowers, and Intermediaries


Summary

This practice note provides an overview of securities lenders, borrowers, and intermediaries. Lenders of securities, usually large institutional investors, participate in securities lending to earn additional incremental returns from their investment portfolios. Borrowers of securities, usually broker/dealers, seek prompt temporary access to securities to cover short positions, to avoid settlement delays, and to complete arbitrage or other hedging strategies. Intermediaries, as the term suggests, bring together lenders and borrowers and collect fees for a variety of services, including arrangement of loan terms, receipt, and management of collateral, marking collateral to market, investment of cash collateral, recordkeeping, and reporting, and, possibly, loan indemnification.