Securities Lending & Borrowing

Securities Lending & Borrowing

What is SLBM?

Securities Lending and Borrowing (SLB) is a scheme that has been launched to enable settlement of securities sold short. SLB enables lending of idle securities by the investors through the clearing corporation/clearing house of stock exchanges to earn a return through the same. Investors can also borrow shares in SLBM segment.

Basic Features of SLBM
  • Tenure of lending and borrowing is available up to a period from 1 to 12 months.
  • Mainly securities traded in F&O segment are eligible for lending & borrowing under the scheme
  • Investors can generate additional income from the idle shares in their portfolio by participating in SLB segment.
  • Exchanges providing list of Securities for SLB trading on a monthly basis.
  • The specified reverse leg settlement date is the first Thursday of the corresponding month. Each reverse leg settlement date is assigned a specific series number.
  • Those who lend the shares in SLB platform all corporate actions benefits go to the Lender.
  • Borrower can also repay the obligation before the first Thursday of the month.
  • Exchanges quote lending fees per share. Normally it is based on the rate of return expected by the lender, interest rate and the tenure.
  • SLB is offered through automated screen based platform with online facility of trades which are on price –time priority.
Two separate series of contracts are made available as given below:-
  • Contracts which shall continue to be mandatorily foreclosed in the event of AGM/EGM (Series “A”).
  • Contracts which shall not be foreclosed in the event of AGM / EGM. (Series “B”).
Sr No. Series (A) Series (B) Month
1 1 X1 January
2 2 X2 February
3 3 X3 March
4 4 X4 April
5 5 X5 May
6 6 X6 June
7 7 X7 July
8 8 X8 August
9 9 X9 September
10 10 XO October
11 11 N November
12 12 D December
CLIENT ACTIVATION
Clearing and Settlement Procedure
  • Lender Obligation:- Lender has to deliver their shares on T+1 day prescribed as per exchange guidelines before 9:20 am.
  • Borrower’s Obligation:- Borrower has to pay the lending fees in cash and lending price of T-1 day will be considered of particular scrip for calculating the lending fees on T+1 Day.
Note : If lender fails to deliver the shares as per prescribed exchange pay in time on T+1 day, then 25% penalty will be charged to the lender on closing price of CM segment and will be passed to the borrower.
RISK MANAGEMENT
  • Clearing corporation is the central counterparty providing financial settlement guarantee for the SLB transactions and has a healthy risk management system and collects sufficient margins from participants to cover counterparty risks.