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>> NW: No, they are loaning the stock so they can earn the stock loan fees such
>> as interest on the credit balance. This source of income often exceeds the
>> commission end of the biz. Given the recent deep discounts on stock
>> commissions, I am sure the stock loan fees and interest they rip off from
>> the public is more important than ever as a source of income.
<unlurk>
having worked in back offices on & off in the past, i have to say that
stock loan (equities) & repos ("fixed" income) can be a *substantial*
source of financing at relatively little risk to a large firm,
depending on the sophisication of the software systems that enable the
stock loan or repo desks (stock loans are essentially equity "repos")
to manage the huge volumes of stock in & out of the firm's box hourly.
some of the stock loan desks i have seen rival some proprietary
trading desks in number of personnel. and the stock loan folks are
just as busy, sometimes busier!!!
it's not as sexy as the proprietary side, but in bad years, the stock
loan & repo desks subsidize the proprietary traders' bonus pools -- no
joke! i've seen it happen often enough at bonus time. stock loan is
steady money.
- *lk
<relurk>
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