Securities Lending & Borrowing

Securities Lending and Borrowing

Securities lending and borrowing (SLB) allows investors to borrow or lend shares to others.

Long-term stocks lie idle in portfolios giving returns only after they have matured several years later. SLBs allow investors to loan out their stocks to traders, just like any other loan instrument.

Traders have to pay a fee to the lender for a stipulated duration for stock lending. Stock borrowing allows traders to make money off these borrowed stocks by short-selling them in the market.

The National Securities Clearing Corporation Limited collects margins hence reducing the risk involved in this investment greatly.

In India, you can lend or borrow stocks for a minimum period of one month and a maximum period of 12 months. SLBs have a lot of potential in the Indian market. In the last five years, the volume of transactions has increased manifold.

Benefits of Stocks Lending and Borrowing

Benefits for Lenders

Long-term stocks are great investments for the returns they accumulate, but for the most part, they lie idle in portfolios.

Through securities lending, you receive a fee from the borrower depending on the tenure of the loan and the demand of the stock. The stock thus makes money even while it stays in your portfolio.

There is little risk involved as Clearing Corporations guarantee smooth transactions. Lenders do not lose out on bonuses and dividends, and there are no additional capital gains charged on the money made on your stock.

It's a great opportunity for investors to make money off stock lending.

Benefits for Borrowers

The derivatives market does not allow short selling. The SLB instrument enables traders to borrow a security and short it.

It lets stock borrowers make money on the market on the downturn. Futures and options contracts are risky. Traders often use SLBs to hedge their futures and options positions as it is a safer mechanism.

If there is a shortage of delivery in the cash segment, borrowers can use an SLB to meet their obligations.

How Many Stocks are Available in SLB?

Securities lending and borrowing is available for stocks on the F&O segment. Close to 400 stocks are available on the NSE Securities lending and borrowing platform.

This list changes every month and is updated on the NSE website.

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.