Securities lending | B3

Securities lending is a service in which, in exchange for an agreed remuneration rate, the holder of certain assets (donor) authorizes their transfer to a third party – the borrower. The borrower of the loan is free to sell those assets, performing an operation called "short-selling", or use them for other purposes, but he or she is obliged to return them as agreed between the parties. B3 ensures the return of assets.

Donors and borrowers have different motivations regarding securities lending. Donors have long-term strategy, which means they have no intention of selling their assets, but they want to receive additional remuneration. As for borrowers, as a general rule, they believe that the asset is badly priced and want to rent it to sell it and then repurchase it cheaply and return it to the donor, earning a profit by the end of the transactions.

Today, a great number of the world's regulatory agencies recognize short-selling as a practice that benefits pricing and market liquidity.

For the company, the donors will be out of the shareholder base, once formally they are no longer the owners of the assets while they are borrowed. Thus, the donor is not entitled to vote in general meetings of shareholders. However, the right to the corporate events deliberated by the company remains unchanged (both in money and assets), such as: dividends, interest on own capital, bonuses, share subscriptions etc. In general, payments made by the issuing company are reimbursed by the borrower to the donor by contractual obligation, and B3 is responsible for the clearing mechanism, ensuring that the donors of the loans have the same treatment that they would have if they had their assets in the portfolio.