FAQs


Q. 1. What is Securities Lending and Borrowing?
A. Securities lending transaction is a temporary loan of securities between Lender & Borrower. It describes the market practice by which, for a fee (L. Fees), securities are transferred temporarily from one party, the lender, to another, the borrower; the borrower is obliged to return them either on demand or at the end of any agreed term.
   
Q. 2. Why participate in Securities Lending & Borrowing ?
A.
Borrower Lender
To cover a short position : avoidance of settlement failure Incremental return to the idle portfolio
Hedging of futures & options positions
Borrow and lend to reap benefits of the market sentiments
SLB can be used to support trading strategies designed to profit from perceived pricing divergence
   
Q. 3. Who can participate in SLB?
A. Any individual or Institution holding securities for a long term can become a lender in the SLB market and will earn on his/ her idle portfolio.

Any individual who wants securities on a short term basis to fulfill his/ her certain obligations raised due to various reasons can become a borrower in SLB.
   
Q. 4. What all securities can be traded in SLB segment?
A. The dematerialized securities traded in F & O Segment shall be eligible for lending and borrowing under SLB. BOISL shall from time to time announce the addition / removal of the securities to / from the list of eligible securities.
   
Q. 5. What is the procedure for registration of SLB members?
A.
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
   
Q. 6. What is early return and recall?
A. "Recall" means the lender is interested in recalling the security lent, prior to the stock return day of the contract.
"Early Return" means the borrower is interested in returning the security borrowed, prior to the stock return day of the contract.
   
Q. 7. What is Stock Return Day?
A. "Stock Return Day" is the reverse leg settlement date, which means the day on which the Borrower will return the securities to the Lender and the contract will come to an end.
   
Q. 8. How will the fund settlement be handled?
A. The pay-in and pay-out of funds will be through the designated clearing bank account and the Clearing Bank accounts currently used for BSE Cash Segment (Equity Market) will be the designated bank account for settlement of funds obligations under the SLB Platform. The account will be used for the following types of transactions.

  • Lending fees pay in and pay out in every SLB transaction, early recall and early return transactions
  • Financial close out transactions for non delivery of securities in every lending transactions, in early return and in early recall transaction by lender. Financial close out for this transactions is 2 times of highest lending fee on the trade day
  • Auction debit pay in from Borrower account on stock return day due to fail to deliver securities by borrower. Approved intermediary will buy stock from cash segment
  • Pay out of financial close out to lender due to not returning of security by borrower and security not available in auction session.
  • Dividend recovery from Borrower and paying the same to Lender in the case record date falls between trade date and stock return date.
  • Lending fees adjustments in case of foreclosure
   
Q. 9. How will the securities settlement be handled?
A. The pay-in and pay-out of securities will be through the designated pool of account of the participant maintained with CDSL or NSDL. The participant may use the same pool/principal demat account currently used for BSE cash segment for SLB also. Following market types are to be used for giving instructions to the Depositories for securities pay-in :

SLB Pay-in Market Type
For pay-in of Securities by lender SLB
For pay-in of securities in Early recall SLB
For early return of securities by borrower SLB
For return of securities by borrower SLB


Following types of securities transactions will be handled through depository accounts.
  • Pay in by lender
  • Pay out borrower
  • Pay in by new borrower in early recall
  • Pay out to original lender
  • Pay in by original borrower in early return
  • Pay out to new borrower
  • Pay in by borrower on stock return day
  • Pay out to lender on stock return day
   
Q. 10. What is the Stock Return Cycle?
A. At any given time, the AI will list contracts with multiple standardized 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.
For any given stock return day, the last day to borrow and lend will be the third business day prior to the stock return day. If the stock return day is a holiday, then the return will take place on the immediately following trading day.
   
Q. 11. How are the Corporate Actions handled?
A.
  • Dividend: The dividend amount would be worked out and recovered from the borrower on the book closure/ record date and passed on to the lender.
  • Stock Split: The position of the borrower would be proportionately adjusted, and the lender will receive the revised quantity of shares at the time of settlement of return leg of the respective SLB transaction
  • Other Corporate Action: Other corporate actions such as bonus/ merger/ amalgamation / open offer etc: The transactions would be foreclosed from the day prior to the ex-date. The lending fee would be recovered on a pro-rata basis from the lender and returned to the borrower.
In case of foreclosure where the corporate action is announced by AI after the transaction has been executed, lending fees will be adjusted on a pro-rata basis. However, in case of foreclosure where the corporate action is announced by AI before the transaction has been executed there will be no adjustment of lending fee. Market participants will accordingly quote lending fee for the shorter transaction cycle.
   
Q. 12. What happens to those orders which do not get executed?
A.
  Borrower Lender
  Collateral Cash Settlement Collateral Cash Settlement
Trade Day Block Margin :Twice the Lending fee Lending Fee = (Lending fee per share * quantity of shares borrowed)   Block Margin : 25% L. Price of T-1 day close price & M2M  
Trade Day+1 Block the collateral for the following:

a) 100% of Lending Price (Lending price = Closing price of the stock on Trade day-1 * Quantity of shares lent)

b) Mark to Market (marking the outstanding position to change in price of the stock from Trade Day - 1 till Trade day + 1)

c) VaR/ELM 		Lending fee collected from the borrower's account and given to the lender Lending Fee = (Lending fee per share * quantity of shares borrowed Release Margin Receives Lending fee Lending Fee = (Lending fee per share * quantity of shares lent
Trade Day+2 till Stock Return Day-1 a) Mark to Market

b) VaR/ELM 		     
Stock Return Day Release from collateral:

a) 100% of Lending Price

b) VaR/ELM 		     
   
Q. 13. Is early pay-in facility provided to the members?
A. Yes, lender can do the early pay-in in order to avoid margin blocking on trade day.
   
Q. 14. What are the steps involved in case Shortages & Close-out?
A.
  • In the event of fund shortages by the borrowers the SLB transactions will be financially closed out and accordingly, the securities shall be returned to the lenders along with twice the lending fees. In the event, lender fails to deliver securities in the first leg, the transactions shall be closed-out and the Borrower will get twice the Lending fees.
  • In the event the borrower fails to return the securities in the reverse leg, BOISL shall conduct a "Buy-in Auction". The buy-in auction shall be carried out in the Cash Segment of BSE.
  • If the securities cannot be bought through the buy-in auction, then the transactions shall be closed-out. The computation methodology and rate of close-out shall be intimated by BOISL from time to time.
  • In all other cases of shortages BOISL may initiate various actions including withdrawal of borrowing and lending facility of the participant, withhold the securities / funds pay-out due to the participant or any other action as may be decided by BOISL from time to time.
   
Q. 15. What are the Collateral Deposits and Margin requirements for transactions under SLB segment?
 
A. All transactions in the SLB shall be subject to levy of margins. The margins shall be levied at a client level.

The criteria in respect of composition of capital, computation and collection of margins would be as follows:
  1. Composition of Capital (Liquid Assets):
    • SLB Members may note that the capital deposited as collateral towards Additional Capital for Securities Lending and Borrowing is to be maintained in form of Cash and Cash equivalent only. (i.e., Fixed Deposit Receipts of Banks and Bank Guarantee).