Securities Lending


DEFINITION of 'Securities Lending'

The act of loaning a stock, derivative, other security to an investor or firm. Securities lending requires the borrower to put up collateral, whether cash, security or a letter of credit. When a security is loaned, the title and the ownership is also transferred to the borrower.

BREAKING DOWN 'Securities Lending'

Securities lending is important to short selling, in which an investor borrows securities in order to immediately sell them. The borrower hopes to profit by selling the security and buying it back at a lower price. Since ownership has been transferred temporarily to the borrower, the borrower is liable to pay any dividends out to the lender.

  1. Security

    A financial instrument that represents an ownership position ...
  2. Short Covering

    Buying back borrowed securities in order to close an open short ...
  3. Short Selling

    Short selling is the sale of a security that is not owned by ...
  4. Short Squeeze

    A situation in which a heavily shorted stock or commodity moves ...
  5. Commission

    A service charge assessed by a broker or investment advisor in ...
  6. Manufactured Payment

    A payment made to pass through dividend and interest payments ...
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