Review of Securities Lending and Borrowing (SLB) Framework
Summary
This circular modifies the Securities Lending and Borrowing (SLB) framework based on market feedback and consultations. It introduces changes regarding contract tenure, position limits, treatment of corporate actions, and rollover facilities. The revised provisions come into force on January 1, 2018, and direct intermediaries to implement necessary systems and regulatory amendments.
Text
AIs can introduce contracts of different tenures ranging from 1 day to 12 months based on the need of the market participants.
The market wide position limit for SLB transactions shall be 10% of the free-float capital of the company in terms of number of shares.
No clearing member shall have open position of more than 10% of the market-wide position limit. The position limit for an Institutional Investor shall be the same as that for a clearing member.
The client level position limit shall not be more than 1% of the market-wide position limit.
The dividend amount would be worked out and recovered from the borrower on the book closure/ record date and passed on to the lender.
The positions of the borrower would be proportionately adjusted so that the lender receives the revised quantity of shares.
The contacts would be foreclosed on the Ex-date. The lending fee would be recovered on a pro-rata basis from the lender and returned to the borrower.
The AIs shall provide the following facilities to the market participants: Contracts which shall continue to be mandatorily foreclosed in the event of AGM/EGM; Contracts which shall not be foreclosed in the event of AGM/EGM.
Any lender or borrower who wishes to extend an existing lent or borrow position shall be permitted to roll-over such positions... The roll-over shall be conducted as part of the SLB session.
The total duration of the contract after taking into account rollovers shall not exceed 12 months from the date of the original contract. It is clarified that multiple rollovers of a contract by the lender or borrower is permitted.
Rollover shall not permit netting of counter positions, i.e. netting between the ‘borrowed’ and ‘lent’ positions of a client.
Pursuant to the applicability of this Circular, SEBI circular CIR/MRD/DP/33/2010 dated October 07, 2010 shall stand withdrawn. The provisions of other specified circulars, other than that specified in this circular, shall continue to be applicable.
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Source: SecMarx — Review of Securities Lending and Borrowing (SLB) Framework. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.