Securities Finance glossary

Securities lending and borrowing

Transaction motivated by the desire of one counterpart to borrow securities and of the other to lend them.

Securities financing transactions (SFTs) allow investors and firms to use assets, such as the shares or bonds they own, to secure funding for their activities. A securities financing transaction can be:
• A repurchase transaction – selling a security and agreeing to repurchase it in the future for the original sum of money plus a return for the use of that money
• Lending a security for a fee in return for a guarantee in the form of financial instruments or cash given by the borrower
• A buy-sell back transaction or sell-buy back transaction
• A margin lending transaction

The completion of a securities transaction where it is concluded with the aim of discharging the obligations of the parties to that transaction through the transfer of cash or securities, or both.

The time period between the trade date and the intended settlement date.

TA practice whereby delivery of a large amount of a security may be made in several smaller blocks so as to reduce the potential consequences of a fail. May be especially useful where partialling is not acceptable. Securities lending return to lendable (SLRTL): The revenue from securities lending, scaled by the lendable assets, in basis points.

Directive (EU) 2017/828 of the European Parliament and of the Council of 17 May 2017 amending Directive 2007/36/EC as regards the encouragement of long-term shareholder engagement. Updated to SRD II as of 3 September 2020.

Sets out regulatory requirements for insurance firms and groups, covering financial resources, governance and accountability, risk assessment and management, supervision, reporting and public disclosure.

Short selling is the sale of a security that is not owned by the seller or that the seller has borrowed. Short selling is motivated by the belief that a security’s price will decline, enabling it to be bought back at a lower price to make a profit.

SSIs are the agreements between two financial institutions which fix the receiving agents of each counterparty in ordinary trades of some type. These agreements allow traders to make faster trades since the time used to settle the receiving agents is conserved.

A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything.