AUTOMATED LENDING AND BORROWING MECHANISM (ALBM)
Summary
This circular permits the Automated Lending and Borrowing Mechanism (ALBM) as a generic product to facilitate securities lending and settlement deferral. It establishes eligibility criteria for stock exchanges, specific scrips, and risk containment measures including position limits and margin requirements. The document outlines procedures for managing risks associated with pure securities borrowers and mandates SEBI approval for exchange implementation.
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Based on the recommendations of these Groups, it has been decided that ALBM would now be permitted as a generic product. The basic purpose of ALBM would be to facilitate lending and borrowing of securities as envisaged by the Stock Lending Scheme 1997 (SLS).
An Exchange would be eligible to introduce the ALBM if it satisfies the following conditions : i. The exchange must demonstrate that it has a well-designed software for margin computation and well established governance structures... ii. The exchange or its clearing corporation must be an approved intermediary under the stock lending scheme.
Exchanges desirous of implementing ALBM will obtain SEBI approval for : i. The eligibility criteria for scrips to be included in the ALBM list ii. The process of choosing the scrips in the ALBM list iii. Disclosure and transparency provisions relating to the above
There will be a position limit per broker of Rs.40 crores in the aggregate and Rs 5 crores per scrip. These limits will be determined on the basis of gross position for the broker. These limits would apply only to trade positions that are netted against ALBM positions...
A short seller receives charges in the ALBM when the lending price is below the clearing price. Such charges shall be released to the short seller only if either the seller actually owns the shares... or the seller actually has funds by which he could have taken delivery...
The margin on all trade positions that are proposed to be netted against ALBM transactions shall not be less than 10%. Further, in cases where the position so netted by a member exceeds Rs 20 crores, the excess over Rs 20 crores shall attract a margin which shall be at least 15%...
In case the gross position in ALBM in any exchange, in any scrip, exceeds the parameters mentioned below, the additional margin shall be levied... at a rate which is higher of the rates determined as per the tables below...
These margins would be paid 100% in cash or fixed deposits or government securities, or a combination of three. Mark to Market Margin shall be collected separately from daily/exposure margin...
Pure securities borrower means a borrower of securities who does not have an offsetting long trade position.
Pure securities borrowers will have the option of depositing the collateral with the clearing corporation. A pure securities borrower who does so would not be subjected to any margin.
The Stock Exchanges would be allowed to introduce ALBM after satisfying the conditions and modalities detailed above and after seeking formal approval from SEBI in this regard.
Source: SecMarx — AUTOMATED LENDING AND BORROWING MECHANISM (ALBM). Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.