Both a lender and a borrower be

Securities lending has been called an "invisible business" and a "shadow market". There are no screen quotes, no mandated disclosures and no balance-sheet reckonings. The daily trillion-and-a-half dollars traded in this market are only noticed when there's a crash or a sudden surge in interest rates.

But securities lenders and repo traders say proudly that their business rode out the recent turmoil with no loss of money and only minor adjustments to market practice. "We're spending more time with our risk managers," says Mark Katzelnick, head of global equity finance at ING Barings in New York, "looking at volatility and counterparty risk."

In 1994 there was more general panic, triggering intraday calls for margin, as lenders scrambled to adjust the level of collateral to volatile market prices. In last year's Asian meltdown such frequent margin calls were ruled out by the time zone difference but lenders seemed to have sufficient...