Here's what it means for you - including the rights you have in this situation [Thread] #BankerX
Securities lending is simply when you allow someone to borrow your securities & they pay you. Think of your stock as a book. You're lending someone your book and they pay you to borrow it. They agree to return the book within 12 months.
Securities lending is widely used by pension fund and large institutions who are long term holders of stocks. They also have a large library of books and prefer to earn cash by lending them out instead of not being used in their libraries.
In SA the entity governing securities lending is SASLA (sasla.co.za/index.php/en/d…).
Have brokers have lost their clients money by investing collateral funds into risky assets? Yes.
forbes.com/forbes/2009/06…
Simple - they want to sell it
It's called short selling
Short-selling is offloading borrowed security intending to repurchase at a lower price to cover your position and offset the costs of prime brokerage. WTF?!
Okay, here's a simple example:
He pays you $30 to borrow it for the month
KK sells the stock at $1,650, now he has $1,650 in his pocket but still owes you a stock
Tesla falls to $1,550
KK goes and buys it back at $1,550 and gives your stock back
KK makes 1650 - 1550 - 30 = $70
What if Tesla stock goes from $1650 to $1750?
This is called a short squeeze. Every trader will tell you this is the WORST place to be. Your chest tightens up. People have lost $23bn betting against Tesla.
telegraph.co.uk/technology/202…
Simply - if the person borrowing your stock is losing money, they need to be healthy enough to return your stock.
Introduction to Securities Lending 4th edition. Short selling, prime brokerage, repos, arbitrage & margin calls make for great Tinder convos.
sasla.co.za/index.php/en/d…
Link to EE T&Cs:
support.easyequities.co.za/support/soluti…