Unlike a buy/sell trade, a securities lending transaction has a life cycle that begins with the settlement of trading and continues until they return. During this life cycle, different life cycle events will occur: historically, the securities lending market has been very manual, with a post-boursual treatment that involves many hours of work. In recent years, it seems that many suppliers have learned to ensure the automation that the sector sorely needs. Securities lending is also involved in hedging, arbitrage and non-handling credits. In all of these scenarios, the benefit to the securities lender is either to obtain a low return on the securities currently held in its portfolio, or to possibly cover cash requirements. The loan of securities is the act of lending to an investor or an investment company. The loan of securities is conditional on the borrower setting up guarantees, whether cash, guarantees or letters recommended. When a security is lent, the title and ownership are also transferred to the borrower. The first stock loan driver was the coverage of settlement errors. If a party fails to provide you with inventory, it may mean that you are not able to supply stocks that you have already sold to another party. In order to avoid the costs and penalties that may result from the failure of the transaction, the stock could be borrowed for payment and delivered to the second part. When your initial portfolio finally arrived (or was obtained from another source), the lender received the same number of shares to the secured loan. In the case of securities lending, securities are classified according to their ability to absorb.
High-liquidity securities are considered “light”; these products are easy to find on the market, someone should decide to borrow them for the purpose of selling them briefly. Securities that are illiquid in the market are considered “hard.” Due to various rules, short selling in the United States and some other countries must be preceded by the location of security and the amount that one wants to sell briefly to avoid bare short circuits. However, the lender can establish a list of securities that do not require such a location. This list is designated as an easy-to-borrow list (short for ETB) and is also called flat-rate insurance.