Securities Lending

Securities lending is, as the term implies, the practice of lending securities. In Switzerland this is done without changes in the ownership of the borrowed securities.

The practice of securities lending involves three parties: The borrower, the broker and the lender.

The borrower must provide the lender with collateral to secure the securities loan and must pay the lender interest on the loan. The broker connects the securities lender with the securities borrower and adminsitrates the loan. In exchange for these services, the broker takes a commission (normally a share of the interest paid by the borrower).

Example: Some banks borrow securities from their customers in order to take advantage of falling rates through short selling.

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