In exchange for borrowing your securities, a borrower will pay you a lending fee.
The lending fee is the price of a loan and is typically quoted in basis points (bps) where 1% is equivalent to 100 bps. The industry generally categorises the available supply of lendable securities in 1 of 3 ways, which is ultimately dictated by the lending fee: General Collateral (or GC) = securities with a lending fee less than 100bps, Special = > 100bps and Deep Special = >400bps
Lending fees are dynamic and are driven by many factors. These factors ultimately influence price either by influencing the availability of lendable supply or the demand to borrow certain securities. As a consequence, something which is currently General Collateral can become Special tomorrow, and vice versa.
Sharegain seeks to focus on the returns that can be generated from the ‘special’ portion of a client’s portfolio. Whilst we’re of course able to lend GC securities, by focusing on specials we can minimise client’s exposure and therefore minimise risk, whilst optimising their returns.
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