Hello YouTube, Todd Ault here, and Welcome to Wall Street Words! Today's Wall Street term is "Securities Lending"

Securities Lending, an important part of the capital market structure. When you want to buy or sell securities, you have to go to a broker dealer. When you go to a broker dealer, you can borrow securities from someone else and you can sell them before you own them. When you sell them before you own them, you're shorting a stock. You're technically borrowing, say, IBM, selling it first with the hopes of buying it back later. Those securities lending transactions have a rate attached to them. You can do that through your own broker dealer account. This is also is done with hedging, other derivative type transactions. Securities lending is an important component of the market and the structure of how it operates. Shorting stocks is a regular component of trading and you must borrow those securities first before you can sell them. Securities Lending.

Definition - The act of loaning a stock, derivative or other security to an investor or firm. Securities lending requires the borrower to put up collateral, whether cash, security or a letter of credit. Securities lending is important in several trading activities, such as short selling, hedging, arbitrage, and fails-driven borrowing. When a security is loaned, the title and the ownership are also transferred to the borrower. Securities lending is generally conducted between brokers and/or dealers and not individual investors. To finalize the transaction, a securities lending agreement, known as loan agreement, must be completed. This sets forth the terms of the loan including duration, lender’s fees and the nature of the collateral.

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