Overview

Stock Lending and Borrowing is a great way to generate extra income with stocks that you aren't currently using for transactions. As a trader, you can borrow stocks for similar reasons - short-term profit. Settlement is quick and easy, because there is no need for physical settlement, and there is no counter party risk. Systematix, with its highly experienced team and near-instant reactions to market fluctuations, can help you as an investor or trader to help make a little extra money via SLBM.

Securities Lending and Borrowing (SLB) is a scheme that is a temporary loan of securities between Lender & Borrower. SEBI has allowed all categories of investors including retail and institutional to borrow as well as lend securities. It describes the market practice whereby securities are temporarily transferred by one party (the lender) to another (the borrower) via an approved intermediary for a fee. Borrower is obliged to return them either on demand or at the end of any agreed term and also has an option to early return. Lender may recall securities at any time within normal market settlement cycle.

Benefits of SLBM

If you are a Lender

sblm-risk

Risk free income with low cost

protection

Protection of all rights as owner

settlement

Settlement guaranteed by NSCCL

potential

Potential to improve the portfolio performance

If you are a Borrower

cover

Cover short sale position

arbitrage

Arbitrage

pair

Pair trading

financing

Financing transaction

Getting Started

Systematix is a member of NSE & BSE in the SLB segment and facilitates borrowing and lending of shares subject to the acceptance of the various terms and conditions.

The Process

zigzag
01

Lender places an order with the participant mentioning the stock, quantity to lend, time period, and lending fees he is expecting. Lending fees is quoted on a per share basis.

02

Borrower places an order with the participant mentioning the stock, time period, quantity and the lending fees he is ready to pay.

03

Order matching on the lending fees takes place similar to trading on an exchange.

04

The lender is asked for some percentage of total amount of stocks to be lent to ensure he doesn't default after saying yes to lend. This margin is released once stock moves out of his demat account when lent.

05

Borrower brings in certain additional percentage of stock value as a margin and additionally lending fees. Once borrwoed, stocks can be sold effectively blobking only the additional percentage. But it has to be brought back while entering the transaction.

06

Daily MTM on the margin to ensure no borrower default risk.

07

At the end of the contract, lender gets back the stock and borrower margin is released.

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Frequently Asked Questions

Presently securities available for transactions in SLB are: All F&O securities + eligible Non F&O securities + Eligible Index ETF’s.

Any existing member/custodian of CM segment can register as a participant in SLB.
following are THE requirementS for registering as a participant:

  • Application in writing to NSCCL on letter head of the clearing member
  • Enter into an agreement with NSCCL in the prescribed format which is referred to as “PartA” of the Master Agreement. The format for the agreement is provided in SLBM circular 10164 dated 30th Jan 2008
  • Minimum deposit of Rs. 10 lacs to be given as demand draft favoring National Securities Clearing Corporation Ltd.
  • Board Resolution for becoming a participant in SLB
  • Open an account with CDSL for SLB settlement

In case of lending and borrowing on behalf of clients the participant should enter an agreement with the client as prescribed. The participant is also required to obtain a UCI code for the client after which the client can lend and borrow in SLB The format for agreements and procedure for obtaining a UCI code is available in the SLBM circular 10164 dated 30th Jan 2008.

SEBI has permitted all categories of Investors viz. Retail and Institutional to participate in SLB.

To register in SLB, the FII/MF needs to enter into an agreement with participants (members in CM segment) who are registered with NSCCL for SLB. The participant will obtain a Unique Client Id (UCI) for the FII/MF from NSCCL. The FII/MF also needs to appoint a custodian who will confirm and settle SLB transactions on behalf of the FII/MF. The custodian of the FII/MF shall obtain a Custodial Participant (CP) code for the FII/MF from NSCCL on providing requisite documents such as SEBI Registration certificate, PAN card copy etc. The format for agreements and procedure for obtaining a UCI code is available in the SLBM circular 10164 dated 30th Jan 2008.

NSCCL acts as a central counterparty providing financial settlement guarantee for SLB transactions. NSCCL has a robust risk management system and collects adequate margins from participants to cover counterparty risks.

The tenure for SLB transactions is up to 12 months. 12 fixed monthly tenures with fixed reverse leg settlement dates are available for transactions in SLB. The fixed settlement dates are the first Thursday of the respective month and the date is displayed on the NEAT SLB trading screen at the time of order entry. Each month is assigned a series to it with January having series as 01 up to December having series as 12.

T Day: The Transaction is executed on T Day between the lender and borrower.

T+1 day: The Lenders are required to deliver the securities for pay-in on T+1 day. Securities are thereafter transferred to the borrowing participants during pay-out on T+1 day. The borrower shall bring the lending fee on T+1 which shall be passed on to the lender in the funds pay-out.

Reverse leg settlement date: The borrower needs to deliver the securities at the time of pay-in which shall be returned back to the lender during the pay-out.

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