Securities Lending and Borrowing

Transcription

1 Securities Lending and Borrowing User Guide 8 21 June 2016 Version 1.5

2 CONTENTS 1. Introduction Document Purpose Intended Audience Document History Overview Authorising Standing Instructions Overview Create Query / Modify / Delete Loan Requests Overview Create Authorise Reject Correct Lender Recall Overview Create Authorise / Reject Correct Repay Loans Create Authorise / Reject Correct SECURITIES LENDING AND BORROWING 2 of 21

3 7. Queries Overview Securitywise Lent Position Loan Repayment Requests Outstanding Loans Pending Recalls DISCLAIMER: THE INFORMATION CONTAINED IN THIS DOCUMENT IS A GUIDE ONLY. ALL PARTICIPANTS ON ANY NZX MARKET MUST COMPLY WITH THE RELEVANT RULES, AND THIS DOCUMENT IS NOT A SUBSTITUTE FOR THOSE RULES. NZX CLEARING WILL DETERMINE, IN ITS SOLE DISCRETION, WHETHER ANY PARTICIPANT OR POTENTIAL PARTICIPANT MEETS THE REQUISITE CRITERIA TO BECOME AND REMAIN A PARTICIPANT. THOSE WISHING EITHER TO TRADE IN ANY PRODUCTS AVAILABLE AT NZX OR TO OFFER AND SELL THEM TO OTHERS SHOULD CONSIDER BOTH THEIR LEGAL AND REGULATORY POSITION, INCLUDING THE RELEVANT RULES, AND THE RISKS ASSOCIATED WITH SUCH PRODUCTS BEFORE DOING SO. NO PART OF THIS PUBLICATION MAY BE REDISTRIBUTED OR REPRODUCED IN ANY FORM OR BY ANY MEANS OR USED TO MAKE ANY DERIVATIVE WORK WITHOUT WRITTEN PERMISSION FROM NZX CLEARING. NZX CLEARING (INCLUDING ITS PARENT COMPANY DIRECTORS, OFFICERS, EMPLOYEES AND CONTRACTORS) SHALL NOT BE LIABLE (EXCEPT TO THE EXTENT REQUIRED BY LAW) FOR THE USE OF THE INFORMATION CONTAINED HEREIN HOWEVER ARISING IN ANY CIRCUMSTANCES CONNECTED WITH ACTUAL TRADING OR OTHERWISE. NZX CLEARING IS NOT RESPONSIBLE FOR ANY ERRORS OR OMISSIONS CONTAINED IN THIS PUBLICATION. THIS PUBLICATION IS FOR INFORMATION ONLY AND DOES NOT CONSTITUTE AN OFFER, SOLICITATION OR RECOMMENDATION TO ACQUIRE OR DISPOSE OF ANY INVESTMENT OR TO ENGAGE IN ANY OTHER TRANSACTION. ALL INFORMATION, DESCRIPTIONS, EXAMPLES AND CALCULATIONS CONTAINED IN THIS PUBLICATION ARE FOR GUIDANCE PURPOSES ONLY, AND SHOULD NOT BE TREATED AS DEFINITIVE. SECURITIES LENDING AND BORROWING 3 of 21

4 1. Introduction 1.1 Document Purpose The purpose of this document is to provide participants with information on how to use the Securities Lending & Borrowing module within the TCS BaNCS system via the font-end interface. It describes the functionality available to participants etc. 1.2 Intended Audience This document is intended for use by Clearing & Settlement Participants. 1.3 Document History Version Date Nature of Amendment Oct-2008 Initial draft Oct-2008 Add detail Jun-2009 Updates for May 2009 release Jul-2009 Changed screen shots for EXT2 region. Various other wording additions Dec-2009 Revised screenshots. Minor text updates Jun-2016 Updates for BaNCS V7 SECURITIES LENDING AND BORROWING 4 of 21

5 2. Overview The Securities Lending and Borrowing facility provided by the CHO allows loans to be conducted through the CHO where the CHO will be a central counterparty to all loan transactions between Clearing Participants. Consequently, both the borrower and the lender must be Clearing Participants. A streamlined process will be available for Depository Participants who wish to be lenders only. In BaNCS a Business Partner role of Lender will be allocated and Depository Participants will have no access to any other clearing functions in BaNCS. Whilst TCS BaNCS supports Automatic Lending, CHO will only perform Strategic Lending. Strategic lending is the process by which borrowers will be allowed to borrow securities for any purpose. In strategic lending: The borrower will enter a loan request into the system The system will validate if the borrower has sufficient collateral to cover the loan. If the borrower does not have adequate collateral, the loan request will be rejected by the system If the borrower has sufficient collateral, the required collateral will be blocked The loan will be allocated by selecting lender(s) The collateral will be valued periodically to mitigate risk arising out of the transaction The collateral can either be in the form of cash or any other eligible securities as approved. 2.1 Authorising Participants have the ability to create an authorising facility by selecting to activate the Maker/Checker flag. This flag is set at the Participant level (BP setup) by the CHO/CDO and can be activated or de-activated at any time, depending on the Participant s preference. The maker/checker function applies to the following SLB functions: Lender Recall Requests Loan Repayment Requests Loan Requests SECURITIES LENDING AND BORROWING 5 of 21

6 3. Standing Instructions 3.1 Overview Standing instructions can be set-up by the lender or the CHO. A lender gives standing instructions so that any excess balance in the account could be used for lending purpose. Lenders must set up a standing instruction for their excess securities to be part of the lending pool. Instructions for Lenders are re-created every day as part of a batch process. For example, if a lender has a "maximum lendable position" of 10,000, the system will create the 10,000 in the lending pool every day by crediting the Lendable balance and debiting the Normal balance. At the end of every day the lendable amount is returned to the Normal balance and a new instruction is created the next day based on the lenders balance, instruction etc. If the lender happens to loan out 5,000, the system will still create 10,000 in the lending pool the next day, as long as the lender has the stock available and the instruction hasn't expired. Each instruction must have an expiry date. This is the date the lending instruction will stop being created each day. When the lending instruction expires, outstanding loans for that lender will not be recalled automatically. The system will just cease to add their excess securities to the lending pool each day. 3.2 Create Standing instructions are created through the Depository Module as follows: 3) Select Instructions from the Menu Bar 4) Select the Create -> Instructions option from the Menu Bar to bring up the Create Instructions Screen 5) Enter BP ID and A/c No. to lend from 6) Select Lending Pool 1 from the Lending Pool Drop Down menu 7) Select Lender from the Role Drop Down menu 8) Click the Add button to add instruction details a. Enter ISIN code of lendable securities into Instrument Field b. Select quantity of percentage c. Enter minimum normal balance or maximum lendable position required d. Enter expiry date which determines the maturity date of the instruction 9) Click the Create button to create instruction SECURITIES LENDING AND BORROWING 6 of 21

7 Lender Standing Instructions screen 3.3 Query / Modify / Delete Active standing instructions can be queried, modified or deleted in the standing instructions query screen as follows: 3) Select Instructions from the Menu Bar 4) Select the Query -> Instructions option from the Menu Bar to bring up the Query Instructions Screen 5) Enter details and click on Search button to display current standing instructions within the selected parameters 6) Select the required record displayed and click on Delete button to delete the standing instructions; or 7) Select the required record displayed and click on the Modify button to view and modify the standing instruction details 8) Amend details and click on the Release button Query Instructions screen SECURITIES LENDING AND BORROWING 7 of 21

8 Standing Instructions modify screen Field Descriptions: Field Name Description BP ID: BP ID of the lender A/c No: Account number of the lender Lending Pool: Identifies the pool for lending Role: Identifies the role as lender Quantity/Percentage: Lender can give standing instruction to lend in terms of security quantity or as a percentage of the balance in the account of the Lender. You can select either Quantity or Percentage Minimum Normal Balance: Represents the minimum security balances to be maintained in the account of the lender Maximum Lendable Position: Represents the upper limit on the lending from the lender SECURITIES LENDING AND BORROWING 8 of 21

9 4. Loan Requests 4.1 Overview The SLB component will service borrowing requests on a FIFO basis that is, as and when a request is received, the component will process the request and a loan will be allocated or the request is rejected. Business Rules The security must be in valid status and eligible for lending The account must be in a valid status and the borrower must own the account specified in the borrowing request For strategic lending, the SLB component will allocate either full amount or nothing, if the requested quantity is not available in full with the lenders. Partial loans will not be supported in the system but borrowers who want to take a partial loan can query the stock available in the pool and submit a new borrowing request with a smaller request amount The borrower must have sufficient collateral in his collateral account The quantity/nominal value specified must be multiples of the smallest tradable denomination for the security 4.2 Create Participants must create requests for a new loan on a security. Loan requests are created in the Request screens. The details entered must be verified by a Checker, unless the Maker/Checker indicator is turned off at the Participant Set Up level. Users can create a request if they have the Maker (Create) right in the system user setup. To process (create) a loan request: 3) Select Loan Request from the Menu Bar 4) Select the Create -> Loan Request option from the Menu Bar to bring up the Loan Request screen 5) Enter all required details and click the Release button Loan request details are saved and released for authorisation by the Checker (if applicable). SECURITIES LENDING AND BORROWING 9 of 21

10 Loan Request screen 4.3 Authorise Authorising a loan request involves checking details of the request. Authorising a loan request is only required if the Maker/Checker function has been selected in the business partner setup. Users can authorise a loan request if they have the Checker right in the system. The user that initiated the request cannot be the checker. To authorise a loan request: 3) Select Loan Request from the Menu Bar 4) Select the Check -> Loan Request option from the Menu Bar to bring up the Check Loan Request screen 5) Select the loan request for checking and click the Display button 6) Click the Authorize button 4.4 Reject Rejecting a request involves checking for the request. Requests can be rejected if the details are found incorrect. To reject a loan request: 3) Select Loan Request from the Menu Bar 4) Select the Check -> Loan Request option from the Menu Bar to bring up the Check Loan Request screen 5) Select the loan request for checking and click the Display button 6) Click the Reject button SECURITIES LENDING AND BORROWING 10 of 21

11 Loan Request Authorise / Reject screen 4.5 Correct Loan requests may need to be corrected if the Checker has rejected the request. Users can correct the request details if they have the Maker right in the system user setup. The user that rejected the request can t correct the request. Upon correction, the request will be released for the Checker to authorize again. To correct loan requests: 3) Select Loan Request from the Menu Bar 4) Select the Correct -> Loan Request option from the Menu Bar to bring up the Correct Loan Request screen 5) Select the loan request for checking and click the Display button to display the loan request details 6) Modify details as required 7) Click the Release button to save the modified details and to release it for authorisation by the Checker Loan Request correction screen Loan Request correction details screen SECURITIES LENDING AND BORROWING 11 of 21

12 5. Lender Recall 5.1 Overview A lender or the CHO can recall lent securities at any point of time. The recall can either be for a partial quantity or for the entire outstanding quantity. The process will try to meet the recall needs from the lending pool. The lending pool consists of all the lendable balances based on the standing instructions of the lenders and their available balances. If the lending pool does not have sufficient securities to cover the recall quantity, then a partial allocation will be done from the lending pool and for the remaining amount a lender recall will be issued to borrowers based on longest duration of outstanding loans. If alternate lenders are found for the recall quantity, the loan will be repaid up to the quantity available from the alternate lenders and a recall will be made for the remaining quantity from the oldest borrowers. In the event of a lender recall, the system does not automatically debit the stock from the borrowers account. The system issues a recall to the borrower. These will become "Pending Recalls". They will be reported to borrowers each night and will have a due date on the recall. 5.2 Create To create a lender recall: 3) Select Lender Recall from the Menu Bar 4) Select the Create -> Lender Recall option from the Menu Bar to bring up the Create Lender Recall screen 5) Select the loan for recall and click the Display button to display the loan request details 6) Enter quantity to be recalled 7) Click the Release button Lender Recall screen SECURITIES LENDING AND BORROWING 12 of 21

13 Lender Recall details screen A Lender Recall request must be authorised by another user to be activated, unless the Maker / Checker Indicator has been turned off at the Participant level. The following business rule will be applied to this process: The quantity specified must not be greater than the lent balance in the account 5.3 Authorise / Reject Authorising or Rejecting a lender recall can be done by a user with the Checker right in the system. The user that initiated the recall cannot authorise the loan recall. The user that initiated the recall can however reject the recall. To authorise a lender recall: 3) Select Lender Recall from the Menu Bar 4) Select the Check -> Lender Recall option from the Menu Bar to bring up the Check Lender Recall screen 5) Select the loan recall request for checking and click the Authorise or Reject option on the menu accordingly Lender Recall Authorise / Reject screen SECURITIES LENDING AND BORROWING 13 of 21

14 5.4 Correct Lender recall requests may need to be corrected if the Checker has rejected the request. You can correct the request details if you have the Maker right in the system user setup. Upon correction, the request will be released for the Checker to authorize again. To correct Lender Recall requests: 3) Select Lender Recall from the Menu Bar 4) Select the Correct -> Lender Recall option from the Menu Bar to bring up the Correct Lender Recall screen 5) Select the loan recall request for correcting and click the Display button to display the Lender Recall request details 6) Modify details as required 7) Click the Release button to save the modified details and to release it for authorisation by the Checker Lender Recall correction screen Lender Recall correction details screen SECURITIES LENDING AND BORROWING 14 of 21

15 6. Repay Loans 6.1 Create To create a Loan Repayment Request: 3) Select Repay Loan from the Menu Bar 4) Select the Create -> Repay Loan option from the Menu Bar to bring up the Create Repay Loan screen 5) Enter loan details and click the Search button to display outstanding loans with the chosen parameters 6) Select the loan for recall and click the Display button to display the loan details 7) Enter the Repayment Quantity 8) Click the Release button Create Loan Repayment screen Create Loan Repayment details screen SECURITIES LENDING AND BORROWING 15 of 21

16 6.2 Authorise / Reject Authorising a loan repayment request involves checking details of the request. Users can authorise a loan repayment request if they have the Checker right in the system user setup. The user that initiated the request cannot be the checker. Users that have initiated a request can reject a request. To authorise/reject a loan repayment request: 3) Select Repay Loan from the Menu Bar 4) Select the Check -> Repay Loan option from the Menu Bar to bring up the Check Repay Loan screen 5) Enter loan details and click the Search button to display loan repayment requests with the chosen parameters 6) Select the loan recall request for checking and click the Authorise or Reject option on the menu accordingly Loan Repayment Request Authorise / Reject screen 6.3 Correct Loan Repayment Requests may need to be corrected if the request has been rejected. Users can correct the request details if they have the Maker right in the system. Upon correction, the request will be released for the Checker to authorise. To correct loan requests: 3) Select Repay Loan from the Menu Bar 4) Select the Correct -> Repay Loan option from the Menu Bar to bring up the Correct Repay Loan screen SECURITIES LENDING AND BORROWING 16 of 21

17 5) Enter loan details and click the Search button to display loan repayment requests with the chosen parameters 6) Select the loan recall request for correcting and click the Display button to display the loan repayment request details 7) Modify details as required 8) Click the Release button to save the modified details and to release it for authorisation by the Checker Loan Repayment Request correction screen SECURITIES LENDING AND BORROWING 17 of 21

18 7. Queries 7.1 Overview The following queries are available to participants in TCS BaNCS: Instructions (See Section 3.3) Securitywise Lent Position Loan Repayment Requests Outstanding Loans Pending Recalls 7.2 Securitywise Lent Position Participants can view the quantities of securities lent and available for lending via the Securitywise Lent Position query screen as follows: 3) Select Securitywise Lent Position from the Menu Bar 4) Select the Query -> Securitywise Lent Position option from the Menu Bar to bring up the Securitywise Lent Position screen 5) Enter a security ID and click on the Search button to display details Securitywise Lent Position query screen 7.3 Loan Repayment Requests Participants can view the Loan Repayment Requests via the Loan Repayment Requests query screen as follows: 3) Select Loan Repayment Request from the Menu Bar 4) Select the Query -> Loan Repayment Request option from the Menu Bar to bring up the Loan Repayment Request screen SECURITIES LENDING AND BORROWING 18 of 21

19 5) Enter Loan Repayment Request details and click on the Search button to display the requests within the selected parameters 6) Select a displayed record and click on Display button to view request details Loan Repayment Requests screen 7.4 Outstanding Loans Participants can query outstanding loans and loan history through the Outstanding Loans screen as follows: 3) Select Outstanding Loans from the Menu Bar 4) Select the Query -> Outstanding Loans option from the Menu Bar to bring up the Outstanding Loans screen 5) Enter Outstanding Loans details and click on the Search button to display the outstanding loans within the selected parameters 6) Select a displayed record and click on Display button to view outstanding loans details Outstanding Loans query screen 7.5 Pending Recalls Participants can view Pending Recalls via the Pending Recall screen as follows: SECURITIES LENDING AND BORROWING 19 of 21

20 3) Select Pending Recall from the Menu Bar 4) Select the Query -> Pending Recall option from the Menu Bar to bring up the Pending Recall screen 5) Enter the details and click on the Search button to display the records within the selected parameters Pending Recall query screen SECURITIES LENDING AND BORROWING 20 of 21

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