Glossary
The language of securities-backed financing.
Plain-language definitions of the terms used across this site.
- Stock loan
- Credit secured by a pledge of listed shares; the borrower retains beneficial ownership and recovers the line on repayment.
- Securities-backed financing
- Umbrella term for credit secured by a portfolio of listed securities; a common synonym for a stock loan.
- Block trade
- Purchase or sale of a large line, worked off the order book at an agreed price and then printed to the exchange.
- Loan-to-value (LTV)
- The ratio of the amount lent to the market value of the pledged securities. It is a property of the collateral rather than of the product, so no band is published: it answers to the line’s liquidity and average daily traded volume, price volatility, free float, how concentrated the holding is against the issuer and against the holder’s wider wealth, the settlement and enforcement regime of the market of listing, the currency, and any lock-up or disclosure constraint — and is fixed only after a review of the actual holding.
- Pledge
- The security interest granted over the shares in favour of the lender, held at a custodian.
- Recourse
- The extent of the lender’s claim on other assets on default: non-recourse, limited-recourse or full-recourse.
- Non-recourse
- A structure where the lender can look only to the pledged shares, capping the borrower’s loss.
- Free float
- The portion of a company’s shares actually available to trade, excluding control blocks.
- Beneficial ownership
- The right to the economic benefits of a security (dividends, gains), distinct from legal title.
- Bankruptcy-remote
- An arrangement that isolates the pledged shares from the insolvency risk of the parties, via a dedicated custodian.
- Cross-currency
- A loan drawn in a currency other than the listing currency of the pledged shares.
- Disclosure threshold
- The level of ownership in a listed company at which a holding must be notified to the market.
- Margin call
- A demand for additional collateral if the value of the pledged shares falls below a threshold.
- Tenor
- The maturity of the facility, typically 12 to 36 months.
- Custodian
- The institution that holds the pledged shares for the duration of the loan.
- Block discount
- The gap between a block’s execution price and the last traded market price.
- NVDR
- Non-Voting Depository Receipt: a Thai instrument allowing foreign holding without voting rights.
- Stock Connect
- Schemes linking the Hong Kong exchange with Shanghai and Shenzhen for cross-border access.
- Qualifying counterparty
- A professional or institutional investor meeting the criteria required for this type of transaction.
- Lombard lending
- A loan secured by a portfolio of securities, close to a stock loan in private-banking practice.
- Collateral
- The pledged securities that secure the loan and that the lender can look to on default.
- Haircut
- The discount applied to a security’s market value when sizing the advance; in effect, the inverse of loan-to-value.
- Re-hypothecation
- A lender’s re-use of pledged collateral; well-structured facilities prohibit it, keeping the shares ring-fenced.
- Settlement cycle
- The interval between trade and settlement on an exchange, commonly T+1 or T+2; it governs when a pledge and drawdown can be perfected.
- Substantial shareholding
- A holding large enough to require a market notification once it crosses the local disclosure threshold.
- Lock-up
- A contractual restriction preventing the sale or transfer of shares for a defined period.
- Accelerated bookbuild (ABB)
- A rapid placement of a block to institutional buyers, usually overnight, as an alternative to a negotiated block trade.
- Average daily volume (ADV)
- The typical number of shares traded each day; a key measure of how readily a line could be realised.
- Concentration
- The size of a holding relative to a stock’s free float or daily volume; high concentration lowers the advance.
- Drawdown
- The act of drawing cash under the facility against the pledged collateral.
- Title transfer
- A collateral arrangement in which legal title passes to the lender, as distinct from a pledge, where it does not.
- Securities lending
- Lending the shares themselves, often to short-sellers, for a fee — distinct from a stock loan, which lends cash against shares.
- Coupon / interest
- The financing cost on the drawn amount, serviced periodically or rolled up to maturity.