Explain the Difference between ‘Hypothecation’ and ‘Rehypothecation’

Hypothecation is the process where a client pledges their own assets as collateral to a broker to secure a loan (e.g. for margin trading). The client retains ownership but grants the broker a lien.

Rehypothecation is the subsequent action where the broker takes those hypothecated assets and re-pledges or reuses them for their own financing or trading activities. Hypothecation is the initial pledge; rehypothecation is the secondary reuse by the broker.