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Old 13.09.2017, 22:24
Snusmumriken Snusmumriken is offline
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Re: DEGIRO stock broker: any thought?

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Their hedge fund makes a horribly wrong bet, goes broke and you'll never get your shares back from them ever again. Normally the borrower has to post a collateral for such a contingency, but it all stays within degiro organizations anyway. Loaning money to myself from myself essentially, doesn't sound very serious and obviously a conflict of interests here. Both hedge fund and degiro go broke at the same time and you lose the money
Thank you, ivank.

Here is what they sent me in response to the question:
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For example, if one client wishes to take a short position, shares can be loaned from other client(s) that hold a long position.

Please note that shares are pooled so that as few as possible would ever be lent from one single client.

More information can be found in our investment services information here:

https://www.degiro.co.uk/data/pdf/uk...t_Services.pdf
The document contains this explanation regarding lending:
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Securities Lending
Under the Investment Services Agreement, DEGIRO has contracted the right to use Securities that SPV holds for the clients of DEGIRO. This may be, for example, in order to be able to settle (i.e. to deliver Securities for receipt of payment) an Uncovered Sell Transaction (a transaction in which a client sells Securities that this client does not hold). DEGIRO then uses Securities that
SPV holds for Client A in order to be able to settle the Uncovered Sell Transaction of Client B. In this way, DEGIRO is able to provide the service Debit Securities.
When DEGIRO Lends Securities, SPV will not have enough Securities of the relevant type from that time on. However, the risk that this shortfall will lead to damage for the client is very small.
- Firstly, DEGIRO (and not the borrowing party) is always SPV’s ‘counter party’ and therefore guarantees the timely return of the Lent Securities with its own equity.
- Furthermore, DEGIRO requires security from the borrowing party. If the borrowing party is a client of DEGIRO, the borrowing party provides security with the right of pledge that DEGIRO has on the Balance of that client and the borrowed Securities are included in the continual risk monitoring of DEGIRO. In other cases, the borrowing party must provide security by transferring money or Securities to SPV, which SPV may use in the event of the failure of the borrowing party to buy back the Lent Securities in the market.

Damage for a client whose Securities are Lent therefore arises only at the moment when both the borrowing party and DEGIRO are no longer able to meet their obligations (i.e. are bankrupt) and the value of the security has fallen or the value of the Lent Securities has risen. The amount of the
damage is limited to the difference in value between the Lent Securities and the security provided by the borrower.

Securities that are held under Profile Custody will not be Lent by DEGIRO.
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