Sbl Agreement

Securities-based credit is distinct and different from securities lending. Securities lending is the deed of lending securities to an investment company or bank. Stocks or other derivatives are examples. While in securities-based credit, securities are used as collateral for a loan, this type of loan requires collateral in the form of cash or credit in exchange for the security concerned. As a general rule, no investor participates in the lending of securities. Instead, it takes place between investment brokers and/or traders who enter into an agreement describing the nature of the loan – the terms, duration, fees and guarantees. In addition to the securities lending operations described above, there are also slightly similar sale and retirement operations as well as buy/sell backs. Most SBL activities take place between large, demanding institutions. Institutions follow conventions that have developed over the years and are now embodied in codes such as the Stock Borrowing and Lending Code, developed by the UK Securities Lending and Repo Committee. The International Securities Lending Association has developed standard market agreements such as the Global Master Securities Lending Agreement (GMSLA). The term „securities lending“ is a misleading term, since securities are not actually lent from a legal point of view.

Indeed, the securities are sold to the borrower as part of an agreement on the subsequent repayment of equivalent securities. The original securities may be resold by the borrower to third parties. Therefore, absolute ownership passes through both the securities lent and the guarantees received. The economic benefits of ownership, such as dividends, belong primarily to the borrower (who is the rightful owner), but are „recovered“ from the lender by the borrower who makes equivalent payments to him. The lender waives property rights such as voting rights. However, if the lender wishes to vote on loan securities, it has the contractual right to recall equivalent securities to the borrower. Hong Kong`s regulatory system, which includes restrictions on short selling (including criminal penalties) and stamp duty for which an exemption through the filing of the equity credit agreement must be requested from the tax authorities, is not particularly practical for the sector, but players have generally adapted to it. In the case of sale and retirement or rest transactions, a party agrees to sell securities for a transfer of cash to another party, with a simultaneous agreement to repurchase the same or equivalent securities at a certain price on a date agreed in the future. . . .


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