Securities lending transactions—an introduction
Produced in partnership with Daniel Franks of Norton Rose Fulbright
Securities lending transactions—an introduction

The following Banking & Finance guidance note Produced in partnership with Daniel Franks of Norton Rose Fulbright provides comprehensive and up to date legal information covering:

  • Securities lending transactions—an introduction
  • Key uses of securities lending transactions
  • Payment and delivery obligations in securities lending transactions
  • Key legal issues in securities lending transactions
  • The Securities Financing Transaction Regulation (SFTR)

BREXIT: The UK is leaving the EU on Exit Day (as defined in the European Union (Withdrawal) Act 2018). This has an impact on this Practice Note. For guidance, see Practice Note: Brexit—impact on finance transactions—Brexit planning and impact—financial services, Brexit—impact on finance transactions—Key issues for securitisation transactions and Brexit—impact on finance transactions—Derivatives and debt capital markets transactions—key SIs.

This Practice Note gives an introduction to the financial arrangement known as a securities lending or stocklending. It looks at:

  1. key uses for securities lending

  2. payment and delivery obligations, and

  3. key legal issues which arise in a securities lending transaction

For more information on the industry standard Global Master Securities Lending Agreement (GMSLA), see Practice Note: An introduction to the Global Master Securities Lending Agreements.

A securities lending transaction is a type of financial instrument involving the outright transfer of securities by one party (the 'lender') to another party (the 'borrower') in exchange for the outright transfer of collateral by the borrower to the lender, with a simultaneous agreement between the parties that the borrower will return the loaned securities to the lender at a future date in exchange for the return by the lender to the borrower of the collateral.

Strictly, any asset that is capable of being transferred from one person to another may be subject to a securities lending transaction. Typically, the principal types of asset that are subject to securities lending transactions are equity securities (shares) and debt securities (bonds), although similar transactions using other financial assets such as loans and commodities also exist.

The securities lending markets initially developed as a tool for allowing parties to borrow equity

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