Over the same three months, what the US owes foreign investors rose US$4.87 trillion to US$69.39 trillion, led by portfolio holdings. Rising prices did most of the work, accounting for US$3.95 trillion of the increase.
When the financing is in one currency and the shares are priced in another, the exchange rate becomes part of the value of the shares securing it.
Currency and loan-to-value
Financing providers measure an advance against shares by its loan-to-value ratio, which they calculate in the currency of the financing, so a move in the exchange rate can change the ratio even when nothing else does.
Take an investor in London who raises £6 million against a holding of US shares worth £10 million at the day’s exchange rate. The loan-to-value is 60%. Now suppose the dollar falls 10% against sterling while the share price stays flat in dollars, so that the same shares are worth £9 million when converted back into sterling and the loan-to-value rises to about 67%.
Nothing happened to the company. The currency alone moved the position closer to the level at which a provider can make a margin call, and a stronger dollar would have had the opposite effect.
One response is to hedge the exposure with forward contracts, whose cost broadly reflects the difference in interest rates between the two currencies and which have to be renewed as they expire. The other is to borrow in dollars. That keeps the loan-to-value steady when exchange rates move, but it shifts the currency risk to the point where the cash is spent or the financing is repaid.
Settlement and time zones
The shares also have to reach the provider’s custodian, generally through the settlement system of the market where they are listed, and those systems run on different cycles: US equities have settled one business day after the trade since May 2024, while the UK is legislating for the same cycle from 11 October 2027, the date EU and Swiss markets have also set. Until then, London settles a day later than New York.
Consider a client in Singapore whose shares are listed in London and who receives a margin call with a deadline measured in days. Singapore is seven or eight hours ahead. Whose business days count, and which public holidays? The agreement should answer both, along with when the cash is advanced relative to the transfer of the shares.
Rules and checks
The client contracts with a specific legal entity, under a specific body of law, which may be neither the client’s home jurisdiction nor the market where the shares trade. Customer due-diligence rules follow the Financial Action Task Force’s Recommendations, which each country applies through its own rules. Recommendation 10 covers customer due diligence. The checks take time, and longer still when the shares, the client and the provider are in three different places.
Specialist providers
Some specialist providers work mainly with clients whose holdings sit outside their home market. EquitiesFirst, for example, provides cross-border equity-backed financing to clients across Asia, Europe and the Middle East. Its facilities are non-recourse, meaning its recourse is limited to the shares provided under the facility rather than the client’s wider assets. Market and currency risk stay with the client, and a client who does not meet a margin call or repay the loan gives up the shares.
The calendar ahead
The October 2027 settlement change will remove the one-day gap between London, the EU and New York. Time zones and currency moves will remain. In 2025, according to the IMF, exchange-rate moves alone accounted for about half of the rise in the euro area’s cross-border portfolio assets. For anyone raising cash against holdings like these, the currency of the financing and the currency in which the shares are valued deserve as much attention as the interest rate and the loan-to-value.
