Lending securities means to give the securities as loan. Generally, lender gives only cash or other fixed assets on the loan. But in some cases, securities can be given as loan. Like lending agreement, lending of securities is also an agreement between borrower and lender.
Borrower who borrow the securities can use the securities for his own benefits. If securities are the stock or shares, borrower can get right to vote. Lender will get the right of fees for lending of securities.
As per ASX, following are the main reasons of lending securities :-
If any person takes the responsibility to sell the securities, if he is unable to sell all the securities, then , he can borrow balance securities.
Hedging is used for reducing the risk of investment. Instead of buying any security, investor can borrow the securities for checking its benefits. If security is not giving benefit, it can be given to its real owner after paying the borrowing fees.
Lending Securities as Collateral
When lender gives loan to borrower, at that time securities of borrower can be used as collateral. Lender can take the securities on loan from borrower. When borrower will return his loan, lending securities will also be returned by lender.
Borrower who borrow the securities can use the securities for his own benefits. If securities are the stock or shares, borrower can get right to vote. Lender will get the right of fees for lending of securities.
As per ASX, following are the main reasons of lending securities :-
- Short selling
If any person takes the responsibility to sell the securities, if he is unable to sell all the securities, then , he can borrow balance securities.
- Hedging
Hedging is used for reducing the risk of investment. Instead of buying any security, investor can borrow the securities for checking its benefits. If security is not giving benefit, it can be given to its real owner after paying the borrowing fees.
Lending Securities as Collateral
When lender gives loan to borrower, at that time securities of borrower can be used as collateral. Lender can take the securities on loan from borrower. When borrower will return his loan, lending securities will also be returned by lender.
