Education Center Topics:
- What Does a Prime Brokerage Provide?
- Prime Brokerage Financing - The Financial Services They Provide
- Global Securities Lending - How Does It Work?
- Global Execution Services - What It Is and How It Works
- Technology & Client Reporting - The Tools of the Trade
- Capital Introduction - The Basics of How It Works
- Services a Good Broker Should Provide
- The Importance of Having a Solid Balance Sheet
- Derivatives Expertise - What a Good Broker Needs to Know
- What can PRIMEBROKERAGE.NET do for you?
Prime Brokerage Global Securities Lending - How Does It Work?
Prime brokerage global securities lending is merely the business world's practice of money, or shares, being lent from one business entity to another.
This lending of course is only on a temporary basis. In exchange for getting money lent to them, the borrower offers up some type of collateral, cash or some other type of financial compensation, like shares. The borrower needs these funds to be lent them for a number of ways they can use them. This setup is commonly referred to as just securities lending or sometimes it is called stock lending. Global securities lending is the same thing, it just means the money being lent can be between two business entities in different parts of the world.
In the world of business and finance, with prime brokerage global securities lending, the word "securities" is simply referring to a fungible unit, something like some kind of currency that has some amount of financial value that it is worth. These units are also negotiable, meaning that there is a contract attached that says the money will be able to be paid unconditionally and that it the terms for its transfer are negotiable, hence the name. Some examples of negotiable instruments include paper money, checks and unsecured promissory notes.
With prime brokerage global securities lending, the securities are broken up into two main categories. One group is the debt securities, which includes things like paper money, bonds or any document that creates debt. The other group is equity securities, which include things like forwards, options and futures, all of which are called derivative contracts. Common stocks are also included in the equity securities group as well. The business entity that is lending out the security is known as an issuer. Depending on the country and the laws and regulations they have in place, some things may or may not meet the criteria to be a security.
When dealing with prime brokerage global securities lending, the securities themselves will likely be characterized by either a physical certificate or an electronic only book entry form, which is more common these days. A certificate may permit the holder a certain number of rights just by their holding of the security. This is known the certificate being bearer. A certificate may also be registered, which simply says the holder is allowed certain rights only they have been registered on the security by a middleman or the issuer themselves.
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