The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results.

Securities lending definition

Securities lending is related to short selling, and is usually conducted between brokers rather than individual investors. An investor borrows securities with the view of selling them immediately, and then buying the securities back at a lower price.

Securities lending definition

Securities lending is related to short selling, and is usually conducted between brokers rather than individual investors. An investor borrows securities with the view of selling them immediately, and then buying the securities back at a lower price.

Importantly, when securities are borrowed, ownership is transferred to the borrower. The borrower, in turn, must put up collateral in return for the securities being loaned out.

The purpose of securities lending is to maximise value from the securities a firm holds. The lender is assured the security will be returned, regardless of the outcome, and benefits from the fees agreed under the securities lending agreement which formalises the deal. The borrower has the opportunity to make money from shorting the securities, keeping any profit left after returning the security and paying the fees. However, the borrower is also liable to any losses if the shorting strategy doesn't work.

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