Easy to borrow
Encyclopedia
In securities lending
, securities are classified by their availability to be borrowed. Highly liquid
securities are considered "easy"; these products are easily found on the market should someone decide to borrow them for the purpose of selling them short
. Securities that are illiquid in the market are classified as "hard". Due to various regulations, a short sale transaction in the United States and some other countries must be preceded by locating
the security and quantity that one would like to be able to sell short in order to avoid naked shorting. However, the lending broker can create a list of securities that do not require such a locate. This list is referred to as an easy-to-borrow (abbreviated as ETB) list, and is also known as blanket assurances. Such a list is generated by broker-dealers based on "reasonable assurance" that the securities on the list are readily available upon customer request. However, if a security on the list cannot be delivered as promised (a "failure to deliver" would occur), the assumption of reasonable grounds no longer applies. In order to provide better grounding for such assumptions, the ETB list must be at most 24 hours old.
Securities lending
In finance, securities lending or stock lending refers to the lending of securities by one party to another. The terms of the loan will be governed by a "Securities Lending Agreement", which requires that the borrower provides the lender with collateral, in the form of cash, government securities,...
, securities are classified by their availability to be borrowed. Highly liquid
Market liquidity
In business, economics or investment, market liquidity is an asset's ability to be sold without causing a significant movement in the price and with minimum loss of value...
securities are considered "easy"; these products are easily found on the market should someone decide to borrow them for the purpose of selling them short
Short selling
In finance, short selling is the practice of selling assets, usually securities, that have been borrowed from a third party with the intention of buying identical assets back at a later date to return to that third party...
. Securities that are illiquid in the market are classified as "hard". Due to various regulations, a short sale transaction in the United States and some other countries must be preceded by locating
Locate (finance)
In finance, a locate refers to an approval from a broker that needs to be obtained prior to effecting a short sale in any equity security, i.e. to "locate" securities available for borrowing....
the security and quantity that one would like to be able to sell short in order to avoid naked shorting. However, the lending broker can create a list of securities that do not require such a locate. This list is referred to as an easy-to-borrow (abbreviated as ETB) list, and is also known as blanket assurances. Such a list is generated by broker-dealers based on "reasonable assurance" that the securities on the list are readily available upon customer request. However, if a security on the list cannot be delivered as promised (a "failure to deliver" would occur), the assumption of reasonable grounds no longer applies. In order to provide better grounding for such assumptions, the ETB list must be at most 24 hours old.