Securities Lending
Securities Lending is a common practice in finance where one financial institution temporarily loans stocks, bonds, or other investments to another institution. It's like a library for financial assets - institutions can borrow securities for a fee, use them for various purposes, and must return them later. This practice helps markets run smoothly and creates additional income for institutions that own large amounts of securities. You might also hear it referred to as "sec lending" or "stock loan" in the industry.
Examples in Resumes
Managed $2B worth of Securities Lending operations for major institutional clients
Developed risk management strategies for Securities Lending and Stock Loan programs
Generated $5M in additional revenue through optimizing Sec Lending operations
Typical job title: "Securities Lending Specialists"
Also try searching for:
Where to Find Securities Lending Specialists
Professional Associations
Job Boards
Professional Networks
Example Interview Questions
Senior Level Questions
Q: How would you manage risk in a securities lending program?
Expected Answer: Should discuss collateral management, counterparty risk assessment, market risk monitoring, and creating backup plans for when borrowers might default. Should also mention regulatory compliance and internal control procedures.
Q: How do you maximize revenue in a securities lending program while maintaining acceptable risk levels?
Expected Answer: Should explain balancing loan rates with risk levels, maintaining diverse borrower relationships, understanding market demand, and monitoring competitor practices while ensuring compliance with risk limits.
Mid Level Questions
Q: What factors affect securities lending rates?
Expected Answer: Should explain how supply and demand, market conditions, collateral quality, and relationship value with borrowers influence lending rates. Should also mention seasonal factors and corporate actions.
Q: How do you handle a failed trade in securities lending?
Expected Answer: Should describe the process of identifying the cause, communicating with counterparties, implementing temporary solutions, and ensuring proper documentation and reporting of the incident.
Junior Level Questions
Q: What is the basic process of a securities lending transaction?
Expected Answer: Should explain the basic steps: finding a borrower, agreeing on terms, exchanging securities for collateral, monitoring the loan, and eventually returning the securities.
Q: Why do institutions borrow securities?
Expected Answer: Should mention common reasons like short selling, covering failed trades, and supporting trading strategies. Should understand basic market mechanics.
Experience Level Indicators
Junior (0-2 years)
- Basic understanding of securities lending operations
- Trade processing and reconciliation
- Understanding of collateral management
- Basic market knowledge
Mid (2-5 years)
- Client relationship management
- Risk assessment and monitoring
- Understanding of regulatory requirements
- Trading system expertise
Senior (5+ years)
- Program strategy development
- Risk management oversight
- Revenue optimization
- Team leadership and mentoring
Red Flags to Watch For
- No understanding of basic market mechanics
- Lack of knowledge about risk management principles
- Poor understanding of regulatory requirements
- No experience with trading systems or operations
Related Terms
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