Manufactured Payment

DEFINITION of 'Manufactured Payment'

A payment made to pass through dividend and interest payments from the borrower to the lender of those securities. Manufactured payments, represented as interest or dividend payments, occur frequently in securities lending. In such an arrangement, title to the securities passes to borrower, but the lender customarily maintains the right to payments which accrue on the security.

BREAKING DOWN 'Manufactured Payment'

Short selling is the most common situation in which one must borrow securities. In order to sell a stock short, a trader must borrow the stock. Since the short seller has borrowed the security, dividend payments made on the stock during the term of the loan must be paid to the lender. This can be a significant cost of short selling if a stock pays a high dividend yield.

RELATED TERMS
  1. Securities Lending

    The act of loaning a stock, derivative, other security to an ...
  2. Modified Tenure Payment Plan

    A way to receive reverse mortgage proceeds that gives the borrower ...
  3. Security Interest

    A legal claim on collateral that has been pledged, usually to ...
  4. Payment Option ARM Minimum Payment

    An option to make minimum payments on an payment option ARM, ...
  5. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  6. Collateral

    Property or other assets that a borrower offers a lender to secure ...
Related Articles
  1. Trading Strategies

    How Does Securities Lending Work?

    Securities lending is the act of loaning a stock or other security to an investor or firm.
  2. Home & Auto

    Understanding The Mortgage Payment Structure

    While a mortgageā€™s size and term set the baseline, the interest, taxes and insurance all influence the amount of the monthly payment.
  3. Credit & Loans

    Mortgage Basics: Costs

    By Lisa SmithPeople generally think about a mortgage in terms of the monthly payment. While that payment represents the amount of money needed each month to cover the debt on the property, the ...
  4. Investing

    What are Fixed-Income Securities?

    For a fixed-income security, the periodic return on the investment is the same throughout the life of the security. Principal is returned at the time of maturity. The payment can be in the form ...
  5. Credit & Loans

    Understanding the Mortgage Payment Structure

    We explain the calculation and payment process as well as the amortization schedule of home loans.
  6. Credit & Loans

    What Is Collateral?

    Collateral is property or other assets that a borrower offers a lender to secure a loan. If the borrower stops making the promised loan payments, the lender can seize the collateral to recoup ...
  7. Options & Futures

    Lending Clubs: Better Than Banks?

    If you need to borrow money and your credit is making it tough, this new option may be just what you're looking for.
  8. Budgeting

    Is Making Biweekly Mortgage Payments A Good Idea?

    Do you think making two payments a month for your mortgage is a good idea? Think twice about that. We tell you why.
  9. Mutual Funds & ETFs

    Securities Lending: Cause Of The Next Financial Crisis?

    Securities lending can pose risks to investor's portfolios and the entire financial system.
  10. Credit & Loans

    The Best Mortgage Deal (May Not Be What You Think)

    Don't judge a mortgage solely by payment amount. Here's what insiders know about choosing the most advantageous mortgage offer.
RELATED FAQS
  1. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
  2. Can I receive dividends on ordinary shares of a company?

    Understand the basics of collecting dividend payments on ordinary shares, including when dividends can be paid and under ... Read Answer >>
  3. Does inflation favor lenders or borrowers?

    Find out under what circumstances inflation benefits borrowers more than lenders and in which situations inflation can be ... Read Answer >>
  4. How do you find accrued interest on a bond?

    Learn how to determine the accrued interest on a bond. The price in the secondary market reflects the accrued interest the ... Read Answer >>
  5. What is the difference between secured and unsecured debts?

    Learn the differences between secured and unsecured debt; discover how banks buffer risks associated with each type of loan ... Read Answer >>
  6. How are dividends usually paid out?

    Discover the two compensation methods commonly used by companies and mutual funds to make dividend payments on equity investments. Read Answer >>
Hot Definitions
  1. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  2. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  3. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
  4. Basis Point (BPS)

    A unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. The basis point is commonly ...
  5. Sharing Economy

    An economic model in which individuals are able to borrow or rent assets owned by someone else.
  6. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
Trading Center