Securities Lending & Borrowing (SLB)
Securities Lending & Borrowing - Concept • Securities lending transaction is a temporary loan of securities between Lender & Borrower. • Describes the market practice by which, for a fee, securities are transferred temporarily from one party, the lender, to another, the borrower. • Borrower is obliged to return them either on demand or at the end of any agreed term and also has an option to early return. • Lender may recall securities at any time within normal market settlement cycle. • It promotes market efficiency and liquidity 2
Market Participants § Lender – – – Insurance Companies Banks HNI’s Mutual Funds Retail § Borrower – – Short sellers, especially long term shorts Cash & derivatives arbitragers Market makers Retail § Approved Intermediary – Clearing Houses 3
Why participate in Securities Lending & Borrowing ? § Lender’s Motivation – It provides lender incremental return on an idle portfolio § Borrower’s Motivation – To cover a short position : avoidance of settlement failure – Hedging of futures & options positions – Borrow and lend to reap benefits of the market sentiment 4
Salient Features in New SLB Platform • SLB Contracts up to 1 year (Minimum 26 contracts) • AI will list contracts with multiple stock return days: § first Thursday of the month § one (1) Thursday prior to the last Thursday of the month § additional three (3) stock return days such that there are stock return days in the first five (5) consecutive Thursdays. • • Early Return and Recall Base Minimum Capital reduced to NIL No separate exe – Login same as BOLT Facility of Early pay-in 5
SLB Mechanism
Example of the contracts available for SLB No. of Contracts Scrip ID First Trade Day Last Trade Day Stock Return Day 1 RIL 02 DEC 10 22 -Nov-10 29 -Nov-10 2 -Dec-10 2 RIL 09 DEC 10 22 -Nov-10 6 -Dec-10 9 -Dec-10 3 RIL 16 DEC 10 22 -Nov-10 13 -Dec-10 16 -Dec-10 4 RIL 23 DEC 10 22 -Nov-10 20 -Dec-10 23 -Dec-10 5 RIL 30 DEC 10 22 -Nov-10 27 -Dec-10 30 -Dec-10 6 RIL 06 JAN 11 22 -Nov-10 3 -Jan-11 6 -Jan-11 7 RIL 20 JAN 11 22 -Nov-10 17 -Jan-11 20 -Jan-11 8 RIL 03 FEB 11 22 -Nov-10 31 -Jan-11 3 -Feb-11 9 RIL 17 FEB 11 22 -Nov-10 14 -Feb-11 17 -Feb-11 10 RIL 03 MAR 11 22 -Nov-10 28 -Feb-11 3 -Mar-11 11 RIL 24 MAR 11 22 -Nov-10 21 -Mar-11 24 -Mar-11 12 RIL 07 APR 11 22 -Nov-10 4 -Apr-11 7 -Apr-11 13 RIL 21 APR 11 22 -Nov-10 18 -Apr-11 21 -Apr-11 14 RIL 05 MAY 11 22 -Nov-10 2 -May-11 5 -May-11
Example of the contracts available for SLB No. of Contracts Scrip ID First Trade Day Last Trade Day Stock Return Day 15 RIL 19 MAY 11 22 -Nov-10 16 -May-11 19 -May-11 16 RIL 02 JUN 11 22 -Nov-10 30 -May-11 2 -Jun-11 17 RIL 23 JUN 11 22 -Nov-10 20 -Jun-11 23 -Jun-11 18 RIL 07 JUL 11 22 -Nov-10 4 -Jul-11 7 -Jul-11 19 RIL 21 JUL 11 22 -Nov-10 18 -Jul-11 21 -Jul-11 20 RIL 04 AUG 11 22 -Nov-10 1 -Aug-11 4 -Aug-11 21 RIL 18 AUG 11 22 -Nov-10 15 -Aug-11 18 -Aug-11 22 RIL 01 SEP 11 22 -Nov-10 29 -Aug-11 1 -Sep-11 23 RIL 22 SEP 11 22 -Nov-10 19 -Sep-11 22 -Sep-11 24 RIL 06 OCT 11 22 -Nov-10 3 -Oct-11 6 -Oct-11 25 RIL 20 OCT 11 22 -Nov-10 17 -Oct-11 20 -Oct-11 26 RIL 31 NOV 11 22 -Nov-10 31 -Oct-11 3 -Nov-11 27 RIL 17 NOV 11 22 -Nov-10 14 -Nov-11 17 -Nov-11
Settlement Cycle Activities Proposed Timings Trade Day Securities Lending & Borrowing session 09: 15 a. m. – 03: 30 p. m. Custodial confirmation by 06: 00 p. m. Final obligations download 07: 00 p. m. Trade day +1 Pay-in of securities/funds 9: 30 a. m. Pay- out of securities/funds 11: 00 a. m. Fund or securities shortages Financial closeout Early return/recall day + 1 Pay-in of securities/funds 9: 30 AM Pay-out of securities/funds 11: 00 AM Fund or securities shortages Financial closeout Stock return day Pay-in of securities 9: 30 AM Pay-out of securities/funds 11: 00 a. m. Buy-in auction for failure of borrower to return securities 12: 00 noon to 1: 00 p. m. Auction obligations download 2: 00 p. m. Stock return day + 1 Pay-in of securities for auction settlement 9: 30 a. m. Pay-out of securities/funds for auction settlement 11: 00 a. m.
Application Process Application to BOISL Member agreement with BOISL (Part A#) Deposit additional base capital for margins Fulfill all conditions specified in SEBI / BOISL Circular Member agreement with Clients (Part B#) and complete all KYC Formalities Activation of the members 10
SLB Snapshot 11
For further information, contact us @ Contact Person Contact No. Email id Ms. Shikha Chauhan 2272 8749 shikha. chauhan@bseindia. com Mr. Ojas Shah 2272 8504 ojas. shah@bseindia. com Ms. Sandeep Kaur 2272 8132 sandeep. kaur@bseindia. com 12
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