Securities Lending Services
Securities lending involves the act of brokers locating shares for clients, typically hedge funds, who want to short the company’s stock. Brokers who provide this action to clients are known as providing Securities Lending Services. Pretty much every major bank or brokerage has a branch devoted to this usually lucrative business model.
The list of lenders is quite comprehensive but some of the biggest and most popular are as follows: Trade Station, Credit Suisse, eSecLending, Finsettle Services, JP Morgan, Rand Merchant Bank, RBC Dexia, RBS, US Bancorp and Citi.
All banks who engage in such a practice must of course by law disclose that they do this. A brief phrasing can be found on all of the securities lender’s websites summarizing that they may generate additional revenue by participating in various security lending programs (if they have one). This should not be a red flag by any means, but could prove useful to gauge the growth and change in revenue share that such a program commands over time.
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