How frequently should securities be marked to market in securities lending?

In securities lending, marking to market should occur daily to accurately reflect the current value of the collateral. This daily evaluation is essential as it ensures that the collateral remains adequate to cover the value of the lent securities, taking into account market fluctuations and changes in value. By marking to market every day, both the borrower and lender can mitigate risks associated with volatility, maintaining a clear and transparent understanding of the collateral’s worth at any point in time.

Frequent marking helps manage counterparty risk and ensure compliance with regulatory requirements, providing assurance that the lending agreement remains balanced and secure. It also enables timely adjustments to the collateral if necessary, ensuring that the lender is always adequately protected against potential defaults. Overall, this practice is a crucial component of effective collateral management in securities lending.