Stock Loan and Securities Finance features explained

Choosing Your Financing Intelligently. The coming regulatory environment means that your best bet for your securities financing needs will be to move towards licensed, fully regulated, institutionally managed lending facilities where shares remain in your account and title. What securities do you own? What is your goal? These are some of the questions you'll be asked by your account adviser at your lending institution should you choose an institutionally managed program where title does not transfer from your control. The answers to these and similar questions will determine the characteristics of your stock-secured loan/securities financing offer. If you own free-trading blue chip securities with steady prices and strong trading volume over at least the preceding four weeks, and if your portfolio is worth more than $500,000, you'll likely be presenting a low-volatility, high value portfolio and will have a full range of loan features to choose from. On the other hand, if you only have relatively thinly traded stocks or you have a small portfolio of weaker securities, your quotes and therefore overall choices will be fewer. You may even receive no offer at all. When your portfolio is minimally sufficient for the maximum security and premium services of an institutionally managed stock loan or line-of-credit program, you will have choices to make. You can, for example, choose a fixed rate standard stock loan. If you choose this, you can then decide whether to make it a hedged portfolio loan by having your brokerage purchase a Put option and bringing it into the loan structure in a manner designed to reduce risk (in theory) of repayment of assets in default to the underlying securities, or you can obtain your loan without this additional "insurance." If you choose a custom line of credit - as opposed to the line of credit financing typically offered to all but the highest net worth customers - then you can be sure you have the freedom to swap or trade shares from your own account, and to guarantee no sale of the securities to fund the loan and that the title remains with the borrower. Custom Institutional Loan Programs with Major U.S. Firms The best institutionally managed loan programs and services allow your shares to always remain in your own account and title, never sold or altered unless forfeited as collateral in default. They offer superior advance rates and the familiar "feel" of a standard bank or brokerage relationship - which is exactly what these facilities are. Look for programs that are prepayable anytime and without penalty, particularly if they are in the line-of-credit format. Look for licensed management, SIPC-insured accounts at major, well-known brokerage/banking institutions.
If you are looking for more than standard offers at brokerages or banks against your securities, which typically involve limited flexibility and lower advance rates, then choose a custom securities-based line of credit or stock loan facility. With this form of financing, you are going beyond the institution's basic services to tap and leverage private depository relationships, allowing LTV's at up to 95% and many flexible features both before and during the loan process. . All loan contracts, account opening, account advising, loan term negotiations, and management are handled solely and exclusively by these licensed and fully-regulated firms. Your lender's account advisor assists you with customizing your loan to your personal preferences. Rates are commonly very low and tied to monthly LIBOR. Most securities lending clients will seek the the greatest possible choice in their financing so as to be in a position to take advantage of at least one competitive loan quote. Good firms provide flexible quotes and features, and may deliver multiple quotes for each when possible. Other features. Your Custom Institutional stock loan or line of credit should provide you with interest-only payment options and if a line of credit, flexible, non-fixed payment schedules to allow you to "refill" your line of credit for reuse over time. These programs should offer regular mailed and/or online statements direct from the banking division of the brokerage where you have your account, and online 24/7 securities account statements direct from your lending brokerage. Flexible special features including full-upside appreciation to borrower and additional line of credit consideration for securities that rise in value over time are also features of the best programs. Collateral shares may even be traded or swapped - with lender approval - for equivalent shares while securing the loan provided that shares of equivalent value are available as a substitute. Other Loan Programs and Services Focus on a loan that you (and your advisors) feel will provide solutions to specific financial problems or challenges. The right loan can provide the confidence of keeping your shares in your own title and account while tapping them for superior rates and terms.

Choosing Your Financing Intelligently.

The coming regulatory environment means that your best bet for your securities financing needs will be to move towards licensed, fully regulated, institutionally managed lending facilities where shares remain in your account and title.

What securities do you own? What is your goal?
These are some of the questions you'll be asked by your account adviser at your lending institution should you choose an institutionally managed program where title does not transfer from your control. The answers to these and similar questions will determine the characteristics of your stock-secured loan/securities financing offer.

If you own free-trading blue chip securities with steady prices and strong trading volume over at least the preceding four weeks, and if your portfolio is worth more than $500,000, you'll likely be presenting a low-volatility, high value portfolio and will have a full range of loan features to choose from. On the other hand, if you only have relatively thinly traded stocks or you have a small portfolio of weaker securities, your quotes and therefore overall choices will be fewer. You may even receive no offer at all.

When your portfolio is minimally sufficient for the maximum security and premium services of an institutionally managed stock loan or line-of-credit program, you will have choices to make. You can, for example, choose a fixed rate standard stock loan. If you choose this, you can then decide whether to make it a hedged portfolio loan by having your brokerage purchase a Put option and bringing it into the loan structure in a manner designed to reduce risk (in theory) of repayment of assets in default to the underlying securities, or you can obtain your loan without this additional "insurance."

If you choose a custom line of credit - as opposed to the line of credit financing typically offered to all but the highest net worth customers - then you can be sure you have the freedom to swap or trade shares from your own account, and to guarantee no sale of the securities to fund the loan and that the title remains with the borrower.

Custom Institutional Loan Programs with Major U.S. Firms
The best institutionally managed loan programs and services allow your shares to always remain in your own account and title, never sold or altered unless forfeited as collateral in default. They offer superior advance rates and the familiar "feel" of a standard bank or brokerage relationship - which is exactly what these facilities are. Look for programs that are prepayable anytime and without penalty, particularly if they are in the line-of-credit format. Look for licensed management, SIPC-insured accounts at major, well-known brokerage/banking institutions.

If you are looking for more than standard offers at brokerages or banks against your securities, which typically involve limited flexibility and lower advance rates, then choose a custom securities-based line of credit or stock loan facility. With this form of financing, you are going beyond the institution's basic services to tap and leverage private depository relationships, allowing LTV's at up to 95% and many flexible features both before and during the loan process. .

All loan contracts, account opening, account advising, loan term negotiations, and management are handled solely and exclusively by these licensed and fully-regulated firms. Your lender's account advisor assists you with customizing your loan to your personal preferences. Rates are commonly very low and tied to monthly LIBOR.

Most securities lending clients will seek the the greatest possible choice in their financing so as to be in a position to take advantage of at least one competitive loan quote. Good firms provide flexible quotes and features, and may deliver multiple quotes for each when possible.

Other features. Your Custom Institutional stock loan or line of credit should provide you with interest-only payment options and if a line of credit, flexible, non-fixed payment schedules to allow you to "refill" your line of credit for reuse over time. These programs should offer regular mailed and/or online statements direct from the banking division of the brokerage where you have your account, and online 24/7 securities account statements direct from your lending brokerage. Flexible special features including full-upside appreciation to borrower and additional line of credit consideration for securities that rise in value over time are also features of the best programs. Collateral shares may even be traded or swapped - with lender approval - for equivalent shares while securing the loan provided that shares of equivalent value are available as a substitute.

Other Loan Programs and Services
Focus on a loan that you (and your advisors) feel will provide solutions to specific financial problems or challenges. The right loan can provide the confidence of keeping your shares in your own title and account while tapping them for superior rates and terms.