What is typically required from a borrower in securities lending?

In securities lending, one of the paramount requirements from a borrower is to provide collateral to safeguard the loan. This collateral serves as a form of security for the lender, mitigating the risk associated with lending out securities. The lender faces the potential risk that the borrower may default or fail to return the borrowed securities, so obtaining collateral helps ensure that the lender can absorb any potential losses.

Typically, the collateral can take various forms, such as cash, government securities, or other high-quality assets. The amount and type of collateral required often depend on the market conditions, the value of the securities lent, and the creditworthiness of the borrower. By requiring collateral, lenders can protect themselves against eventualities that may arise during the lending period.

While it is also true that borrowers may incur a fee for borrowing securities, this is not fundamentally required; instead, it is a standard aspect of the transaction. The other options relating to profit sharing and licensing are not standard practices in typical securities lending agreements and do not pertain to the core requirements of the borrowing process.