Securities lending is a well-established practice, and a $2tn industry, in which owners of stocks, bonds and ETFs lend them out in return for a payment known as lending revenue- rent. Just like lending any other financial asset, the lender receives such rent while retaining all the benefits of ownership – dividends, coupons and the potential appreciation of the asset.
Securities lending plays a key role in capital markets. It brings greater liquidity and efficiency to the market, ensuring the settlement of certain trades, promoting price discovery and facilitating market making.
Principally, every owner of stocks, bonds and ETFs has the right to lend them. However, for decades the practise has been largely confined to big financial institutions who have made billions of dollars from renting out their securities. Many active and passive fund managers, such as mutual funds and ETFs, engage in securities lending to help boost a fund’s performance or to offset the costs of managing a portfolio.
Securities lending is a great source of alpha as it opens up a new stream of revenue on assets you already own, irrespective of their price movement. Given the opaqueness of this industry, many investors are unaware of the hidden value of their portfolio.
Borrowers of securities are the large financial institutions – such as investment banks, brokers and hedge funds.
Typically, they are borrowing to cover short positions, facilitate other trading activities (such as an equity derivative or convertible bond), or take advantage of arbitrage opportunities.
Securities lending, like all market activities, creates a risk/reward trade-off for the lender, borrower and agent lender. The primary risks are:
Borrower/counterparty default: Capital strength and effective collateral management are essential to managing potential default risk. Sharegain only lends to top tier banks, supported by the over-collateralisation of loans (marked-to-market daily at an average 105%), meaning much of the risk is mitigated by the contractual obligations each loan is governed by.
Operational: We manage this through a robust operating framework, integration with global leaders in the post-trade space and a comprehensive understanding of transactional flows and lifecycle management.
Cash collateral reinvestment: Sharegain operates a non-cash collateral lending solution exclusively – ensuring this commonly referenced risk is absent altogether.
Sharegain is a fintech company opening up the $2tn securities lending industry for every investor. We enable private investors to lend their securities and enhance their returns, just like big financial institutions have been doing for decades, effectively bringing the ‘Airbnb moment’ to the stocks, bonds and ETFs of private investors.
As lenders, our services are available to investors with direct holdings in stocks, bonds and ETFs in excess of £500,000.
As borrowers, our services are available to top-tier banks only.
Once you have assessed the risks and made the decision to lend through Sharegain, you sign one agreement with us – our Securities Lending Authorisation Agreement (SLAA) and we become your agent lender. We will then run our onboarding process, following which we onboard you to our borrowers and collateral managers.
Once you’re a client of Sharegain you can log into your dashboard, decide which securities to lend, set your lending terms and your level of engagement.
You have full control over every aspect of the process, and can see every aspect of the loan in real-time. You can be as active as you want, or you simply set your terms and let our tech do the work for you.
Once you’ve set your terms, we will display your securities to our borrowers, on an anonymous and aggregated basis. If you want to understand how loans work, see here.
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With securities lending, as with other investment activities, your capital may be at risk.
Sharegain Ltd. is registered in England and Wales (no. 09600298) and is authorised and regulated by the Financial Conduct Authority (no. 730395).
*This website is directed exclusively at and intended to be used only by professional investors and retail investors with direct holdings in stocks, bonds and ETFs in excess of £500,000. Our website is not directed at any person or institution where (by reason of nationality, residence or otherwise) the availability of our website or securities lending in general is prohibited. The material on this website is for general information and should not be considered as investment advice or solicitation to be involved in securities lending or to use one of Sharegain’s services. Securities lending involves risks and we have not and will not assess whether our service is appropriate for you. If you decide to lend your securities, your capital may be at risk. Please consult professional advisors if you are in any doubt as to whether the service would be beneficial for you or whether you require any consent or need to observe any formalities, before deciding to engage in securities lending.
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