In the realm of finance, Securities Lending simply means the lending of securities or stock by one player to another. The basic provisions of the loan are administrated by a lending arrangement, which compels the borrower to give to the lender some kind of collateral, such as government securities, money, or a letter of credit, equal to or greater than the value of the securities that are lent.
The lending agreement is a legal arrangement that's duly enforceable under applicable state law, according to the agreement. The participants agree on a set fee, calculated as a percentage billed annually based upon the aggregate value of those securities which are loaned, as payment for your loan.
Should the approved mode of collateral be money, the fee can be in the form of alien, which would signify that the creditor would get all the total accruing interest on said money collateral, but will cover the borrower an agreed upon interest rate.
Securities Lending is basically an over-the-counter marketplace, involving the borrowing and lending of securities, mainly because of its goal of hedging short-sale positions. The Securities Lending players involved often include foundations, pension funds and mutual funds, which loan their security holdings to qualified borrowers, such as hedge funds, alternative investors, and other asset managers.
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