Scope and Dynamics of the Securities Lending Industry

Prime brokers understand the importance of the securities lending industry in providing liquidity to markets, but most other participants view it simply as a source of incremental income for long-term investors. In fact, securities lending is a fundamental component of the short-selling market, and the income from lending is not trivial. This description of the very important securities lending industry provides the first in-depth exploration of the behavior of daily lending transactions in 24 countries for a two-year period in 2000-2002. The analysis includes cash and non-cash loans of equity securities and non-equity securities, such as corporate debt, government/sovereign debt, and agency debt.