What is a Day Loan?
Day loans are short-term loans extended by banks to brokers. Sometimes referred to as a morning loan, the proceeds from the loan are used to purchase securities that are intended for delivery later in the day. Once the securities are received, they can then be pledged as collateral for the balance of the day loan, and the bank loan is converted into a standard call loan. The process for requested and obtaining a day loan is fairly straightforward. A broker will identify specific securities he or she wishes to purchase. Rather than tying up existing assets in the purchase, the broker will approach the bank to finance the acquisition of the securities. The bank will quickly review the securities in question and approve the loan. This action usually takes place in the morning, providing the nickname for the day loan. Upon the purchase of the securities with the proceeds from the day loan, the securities are marked for transfer to the broker. This is a process that normally does not take m
