Stock lending is a product used by professionals in the financial market. The product gives share owners an opportunity to lend his shares to a borrower. The borrower has to return the same amount and kind of shares to the lender after a certain time. The lender receives a premium for this. The size of the premium is based on the supply and demand, but also the time the shares have been borrowed and the value of the underlying stock. The lender may also use this product to net off his margin calls.
During the lifetime of the contract, the borrower has the equivalent rights of a stock owner. For this, the borrower pays the lender the above mentioned premium as well as manufactured dividend and other financial rights offered to the shareholder during the lending period. Stock loans can be used to cover a delivery or as a hedge, to speculate in the stock market or to go short in the market (selling shares without owning them).
Standardized Finnish stock loans are traded and cleared at OMX Derivatives Markets. The following is a brief description of the product. For detailed contract specifications, please consult the rules and regulations for derivatives, which is available here on the website.
