Business Glossary

term used when one broker lends securities to another broker to cover customer's short position and imposes a charge for the loan. Such charges, which are passed on to the customer, are the exception rather than the rule, since securities are normally loaned flat between brokers, that is, without interest. Lending at a premium might occur when the securities needed are in very heavy demand and are therefore difficult to borrow. The premium is in addition to any payments the customer might have to make to the lending broker to mark to the market or to cover dividends or interest payable on the borrowed securities.