Securities Lending & Borrowing

Securities Lending and Borrowing

Securities lending is a temporary lending of mainly derivatives securities by a lender to the borrower. SLB is a popular mechanism globally. This mechanism provides liquidity to the equity market and thereby increases the market efficiency.

SLB provides lender incremental return on an idle portfolio. It helps to gain extra returns to shareholders without sacrificing ownership.

Some strategies where securities can be borrowed are listed below:

  • Cover short sale position.
  • Arbitrage
  • Pair trading
  • Financing Transaction

Corporate Actions and taxation handled in SLBM

  • Dividend: The dividend amount would be worked out and recovered from the borrower on the record date and passed on to the lender.
  • Stock Spilt: 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 Actions: Other Corporate Actions such as bonus/merger/amalgamation/open offer the transaction 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
  • Long term and short term capital gains are not affected due to lending in SLB.

SLBM Transaction Details

  • There are no transaction charges and STT is not levied in case of SLB transactions.
  • The tenure for SLB transactions is up to 12 months.
  • Lending fee is quoted on per share basis. Lending fee may be quoted on the annualized yield expected by the lender or the cost which the borrower expects to pay.
  • The transactions carried out under SLB segment are guaranteed by Clearing Corporations and hence do not carry counter party risk.
  • SEBI has permitted all categories

Why SRE for Securities Lending?

Not all financial institutions are members of the SLB segment. At SRE, we pride ourselves of our 30-year legacy in the stock market. Our investments are recommended by certified financial planners, and we have a dedicated research desk to inform you about the stocks that are in demand so they can give you the best returns.

To us, it is important that you achieve your financial goals. We do not hard-sell. Instead, we believe in presenting opportunities with great returns and taking our investor's risk appetites into consideration. So, if you wish to open an account with Sykes & Ray Equities, get in touch with us today.