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 ...
Related Articles
  1. Active Trading Fundamentals

    Short Selling: Making The Ban

    Short selling has been around as long as the stock market, and it hasn't always been looked on favorably.
  2. Active Trading Fundamentals

    When To Short A Stock

    Learn how to make money off failing shares.
  3. Fundamental Analysis

    Short Sales For Market Downturns

    This strategy can help in market downturns, but it's not for inexperienced traders.
  4. Options & Futures

    The Truth About Naked Short Selling

    The media demonizes naked short selling, but in most cases it occurs in a collapse, rather than causing it.
  5. Options & Futures

    Questioning The Virtue Of A Short Sale

    This controversial strategy is blamed for making and breaking markets. Read on to learn more.
  6. Active Trading Fundamentals

    Short Selling Risk Can Be Similar To Buying Long

    If more people understood short selling, it would invoke less fear, which could lead to a more balanced market.
  7. Active Trading Fundamentals

    Short Selling Tutorial

    Want to profit on declining stocks? This trading strategy does just that.
  8. Mutual Funds & ETFs

    The Democratization of the Hedge Fund Industry

    The coveted compensations of hedge fund managers are protected by barriers of entry to the industry, but one recent startup is working to break those barriers.
  9. Professionals

    A Day in the Life of a Hedge Fund Manager

    Learn what a typical early morning to late evening workday for a hedge fund manager consists of and looks like from beginning to end.
  10. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  1. What is each party's role in a reverse repurchase agreement?

    There are two principal parties in a reverse repurchase agreement. The first party, often called the seller, is offering ... Read Full Answer >>
  2. How long can a trader keep a short position?

    There is no mandated limit to how long a short position may be held. Short selling involves having a broker who is willing ... Read Full Answer >>
  3. Can hedge funds trade penny stocks?

    Hedge funds can trade penny stocks. In fact, hedge funds can trade in just about any type of security, including medium- ... Read Full Answer >>
  4. Are hedge funds regulated by FINRA?

    Alternative investment vehicles such as hedge funds offer investors a wider range of possibilities due to certain exceptions ... Read Full Answer >>
  5. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  6. Can hedge fund returns be replicated?

    You can replicate hedge fund returns to a degree but not perfectly. Most replication strategies underperform hedge funds ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  2. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  3. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  4. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
  5. Black Monday

    October 19, 1987, when the Dow Jones Industrial Average (DJIA) lost almost 22% in a single day. That event marked the beginning ...
  6. Monetary Policy

    Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and ...
Trading Center