".......which are used by hedge funds, pension funds, and banks/broker-dealers in order to post initial margin, fund balance sheets, cover short positions, etc......."
I definitely cannot understand this sentence. Why should a pension fund need to borrow stocks? AFAIK they are buying stocks for the long term, hence they should be on the lenders' side..
In this instance (and in the rest of the issue more broadly) I'm *generally* not talking about borrowing equities/credit (perhaps I should have clarified further). I'm mostly referring to borrowing USTs for the purpose of satisfying IM/VM margin requirements and collateral swaps/transformation/upgrades that involve swapping lower quality credit instruments with USTs for the purpose of posting margin.
A pension fund wouldn't need to borrow stocks - you're right. They would be on the lending side in that instance. Generally speaking, they also tend to be on the lending side of USTs as well.
But it's possible to envision a scenario in which a pension fund has a rather low allocation to USTs and wants to use an interest rate swap to allow better liability matching, so they have to post IM to a CCP. In that case, one could imagine a pension fund being on the borrowing side of a securities lending/borrowing transaction.
".......which are used by hedge funds, pension funds, and banks/broker-dealers in order to post initial margin, fund balance sheets, cover short positions, etc......."
I definitely cannot understand this sentence. Why should a pension fund need to borrow stocks? AFAIK they are buying stocks for the long term, hence they should be on the lenders' side..
In this instance (and in the rest of the issue more broadly) I'm *generally* not talking about borrowing equities/credit (perhaps I should have clarified further). I'm mostly referring to borrowing USTs for the purpose of satisfying IM/VM margin requirements and collateral swaps/transformation/upgrades that involve swapping lower quality credit instruments with USTs for the purpose of posting margin.
A pension fund wouldn't need to borrow stocks - you're right. They would be on the lending side in that instance. Generally speaking, they also tend to be on the lending side of USTs as well.
But it's possible to envision a scenario in which a pension fund has a rather low allocation to USTs and wants to use an interest rate swap to allow better liability matching, so they have to post IM to a CCP. In that case, one could imagine a pension fund being on the borrowing side of a securities lending/borrowing transaction.