There are a number of reasons why financial institutions, such as prime brokers, hedge funds and asset managers, want to borrow securities as part of their wider investment strategy. In this video, Tim Fox, Head of Demand Generation, breaks down the top two: short selling and market making.
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To lend… or not to lend?
"With Sharegain, clients gain access to the world's largest borrowers, enjoy the flexibility to choose who they want to lend to, and gain visibility into the 'other side' of the market."
Tim Fox, Head of Demand Generation
FAQs
Who are the borrowers? And why are they borrowing?
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.
What due diligence do you perform on the lenders and borrowers?
Both Sharegain and our counterparties (collateral managers and borrowers) adhere to strict compliance protocols, including a comprehensive Know Your Client (KYC) for all of our lenders, ensuring a rigorous and comprehensive due diligence process. We also facilitate a due diligence process of all our borrowers – who are top-tier banks.
Will I know who the borrower is, and do they know who I am?
Yes.
As a new lender, you will see a list of potential borrowers and you can select those you want to lend to. Borrowers only see the securities which are available for them to borrow, so if you haven’t approved them as a borrower, they will never see your securities as available to borrow. Once approved, your securities will be displayed in our availability list which is aggregated and anonymous. When a borrower requests to borrow one of your securities, the system will either auto-approve the loan or request your manual approval, depending on your preferences. At this point, you will receive a message containing details of the loan and the borrower.
What if the borrower defaults? Are my loans collateralised?
All loans are over-collateralised at 105% of the value of the loan. This collateral is held and managed by two of the world’s largest custodians through our tri-party arrangements.
In the event of a borrower default, you have the right to receive the collateral or ask for its liquidation and receipt of the proceeds.
Sharegain only accepts “High-Quality Liquid Assets” (HQLA) as collateral. Collateral is posted on a ‘pre-pay’ basis, meaning delivery of loaned securities will only occur once collateral is confirmed as settled and allocated to your collateral account. Loans and collateral are monitored in real-time and marked to market at least daily.