A hold loan in securities lending is a type of loan in which a borrower ‘reserves’ a holding of your securities without them leaving your custody account, and pays you a fee. Equally, since the securities will remain in your custody, the borrower will not post collateral.
Why would a borrower want to do this?
A borrower may opt for a hold loan opposed to a conventional loan if, for example, they anticipate that in the near term they will want to use the security for a trade. By placing a hold loan, they can ‘activate’ the loan when they see fit. At this point, the security and collateral would be transferred between the respective parties. With a ‘Hold’ the fee is still paid, yet it removes any collateral obligation on the borrower.
Have more questions?