During what part of the securities processing chain does securities lending occur?

Securities lending occurs during the settlement phase of the securities processing chain. This stage involves the transfer of ownership of securities after a trade has been executed, and it often requires the temporary borrowing of securities to facilitate this process.

During settlement, the lender provides the securities to the borrower, who is typically seeking to cover a short sale or to fulfill a settlement obligation. This activity maximizes liquidity in the market and ensures that trades can be completed on time. By borrowing securities, the borrower can meet their obligations without having to own the securities outright at the moment of settlement.

The other stages, asset servicing, reorganization, and issuance, do not primarily involve the borrowing and lending of securities. Asset servicing refers to the management of securities after they are issued, which includes activities like dividends and interest payments. Reorganization pertains to corporate events like mergers or stock splits, and issuance involves creating and distributing new securities in the market. Therefore, understanding that securities lending is integral to the settlement process highlights its importance in ensuring efficient market operations and the fulfillment of trading obligations.