Review of the Securities Lending and Borrowing (SLB) Framework
Summary
This circular modifies the Securities Lending and Borrowing framework by introducing a roll-over facility for extending lending or borrowing positions. It also makes Liquid Index Exchange Traded Funds eligible for trading under the SLB scheme based on specific liquidity criteria. Stock Exchanges and Depositories are directed to implement these changes through system updates and regulatory amendments.
Text
Any lender or borrower who wishes to extend an existing lent or borrow position shall be permitted to roll-over such positions i.e. a lender who is due to receive securities in the pay out of an SLB session, may extend the period of lending. Similarly, a borrower who has to return borrowed securities in the pay-in of an SLB session, may, through the same SLB session, extend the period of borrowing. The roll-over shall be conducted as part of the SLB session.
Rollover shall not permit netting of counter positions, i.e. netting between the ‘borrowed’ and ‘lent’ positions of a client.
Roll-over shall be available for a period of 3 months i.e. the original contract plus 2 rollover contracts.
Liquid Index ETFs shall be eligible for trading in the SLB segment.
For the purposes of this circular, an Index ETF shall be deemed ‘liquid’ provided the Index ETF has traded on at least 80% of the days over the past 6 months and its impact cost over the past 6 months is less than or equal to 1%.
Positions limits for SLB in respect of ETFs shall be based on the assets under management of the respective ETF.
Take necessary steps and put in place necessary systems for implementation of the above.
Make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.
Bring the provisions of this circular to the notice of the member brokers of the stock exchange and depository participants to disseminate the same on their website.
This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.
Source: SecMarx — Review of the Securities Lending and Borrowing (SLB) Framework. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.