The Security Lending and Borrowing Mechanism (SLBM) is a system where a trader borrows equity shares that they do not already own, lends shares that they own, or lends shares that they own but with no intention to sell them.
- Individuals can borrow stocks and short-sell equities that they do not own in the market.
- It is a hedging tool that is frequently used to balance potential hazards.
- Possibility of boosting liquidity for traders.
- Allows investors to earn fees on long-term held equities if they use them as collateral.
- This tool can be used by sophisticated and experienced traders to boost liquidity.
- Hedgers who want to reduce their possible risks and losses.
- Retail investors can use this service to lend their shares and earn fees.
- Tenure of lending and borrowing is available for up to a period of 1 to 12 months.
- Mainly securities traded in the F&O segment are eligible for lending and borrowing.
- Investors can generate additional income from the idle shares in their portfolio.
- Exchange provides a list of securities for SLB trading every month.
- The specified reverse leg settlement date is the first Thursday of the corresponding month. Thus, each reverse leg settlement date is assigned a specific series number.
- All corporate action benefits go to the lender, for those who lend the shares in the SLBM platform.
- The borrower has the option to repay the obligation before the first Thursday of the month.
- Exchanges quote lending fees per share. It is usually based on the rate of return expected by the lender, interest rate, and tenure.
- SLBM is offered through an automated online platform with a facility for trading on price-time priority.
