Well I have learnt a new broker-speak term today.
Rehypothecation of client securities under a Prime Brokerage Agreementfrom Google AI....
What it is:Rehypothecation essentially means that a prime broker can take the securities held in a client's account, which are technically owned by the client but held by the broker as collateral for a margin loan, and use those securities as collateral for its own financing, such as borrowing funds or engaging in securities lending.
Why it happens:Prime brokers use rehypothecation to finance the margin loans they provide to their clients. By borrowing against the securities, they can reduce the cost of lending to the clients and improve their balance sheet.
How it works:A prime broker will typically take the client's securities as collateral for a margin loan, which allows the client to buy more assets than they could otherwise afford. The prime broker then has the right to use those securities as collateral to raise its own financing. The client's account agreement usually includes a provision allowing for this practice.
Impact on the client:Rehypothecation can have some risks for the client. If the prime broker were to become insolvent, the client's securities could be subject to a general unsecured claim rather than being protected as a specific collateral. However, clients typically agree to this practice as it allows them to access the leverage and services of a prime broker.
Other options:Some clients, particularly those who want to avoid the risks associated with rehypothecation, may opt for segregated accounts where their assets are not subject to rehypothecation or may choose to use a different type of brokerage arrangement.
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Not many but still means there are some margin loan shorts going on with Citi.
JPM and affiliates have circa 35 million borrowed in play still.
Citi and e-capital have about 9 million borrowed in play between them.
About 7.5 million have been returned to lender.
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