A Rising Market Industry Outlook: Security Lending is Stronger than Ever

During the 2008 financial crash, it may have looked as though there was no way the financial sector could recover.

Ten years out from that period, we’re looking at a time of far greater economic productivity.

Those scars still exist in the hearts (and wallets) of many. However, research shows that America is on the rise especially in regard to the stock market. All we need to do is look at security lending to see how that’s true.

Curious about what security lending is and how it works? That’s why we’ve created this guide to security lending to explain this financial concept. Let’s get into how this market looks today (and in the near future).

What Is Security Lending?

If you didn’t already know, security lending is a type of loan that exchanges some form of collateral for security, which can be a stock or a derivative (bonds, currencies, market indexes, etc).

Typically, security lending is used in short selling, where the borrower hopes to sell the security and later buy it back for a lower price. The lender is protected by the collateral they are given (typically more than 100% the value of the security). They also collect fees through a lending contract.

Now that we know how security lending works, how is the outlook for this type of lending and why?

Security Lending Is Stronger Than Ever

Fortunately for short-sellers (and anyone else interested in security lending), collateral loans are stronger than ever in modern times.

There are a few different reasons for this.

• Available Loan Assets: In the current year, there are more assets available to loan than ever before, at a massive $22 trillion.
• Upwards Trends: Currently, the security lending market is up by nearly 10 percent, following an overall upward trend from 2018.
• Increased Global Lending: Asia in 2018 saw multiple challenges throughout its sectors, which could spur potential lending opportunities in the years to come. Political and financial issues across Europe also drove security lending demand, and there looks to be no real end in sight or issues like Brexit.
• New Industries: Tech-forward companies like Amazon and new industries like legal cannabis have begun to set the stage. That means there’s a new market and demand for loans. All of this signals that security lending looks to have a very strong future.

This information doesn’t necessarily mean that security lending is a no-risk bet – no type of lending ever is. Ultimately, the outlook for 2019 looks strong.

Our overall impression? While the market may be cautious, demand should continuously grow and lead to a solid year for security lending.

Now What?

Now that you’re an expert in security lending, you’re ready to forge a path ahead on the financial trail. 

Looking for more great lending advice? Check out some of our other blog articles or learn more about how stock loans work here. Questions and concerns? Feel free to contact us with any issues you’ve got.