Understanding Securities Lending
Securities lending is a common strategy used by institutional and sophisticated investors to generate additional income in their portfolios. Securities lending is when an individual or institutional investor (the lender) temporarily loans securities to a financial institution, such as a brokerage firm, bank or hedge fund (the borrower). The loan is usually facilitated by an intermediary, known as the lending agent or clearing broker. All parties enter into a loan agreement that covers the terms of the loan and how the lender is paid and how the revenue will be shared as well as other provisions that should be considered before entering into such an agreement.
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