Securities Lending & Borrowing The Concept

Transcription

1 The SLB Segment

2 Securities Lending & Borrowing The Concept Securities lending transaction is a temporary loan of securities between Lender & Borrower. Describes the market practice by which, for a fee, securities are transferred temporarily from one party, the lender, to another, the borrower. Securities traded in F&O segment are eligible for lending & borrowing under the scheme. 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. TYPICAL LENDERS Insurance Companies Banks HNI s Mutual Funds Retail TYPICAL BORROWERS Short sellers, especially long term shorts Cash & derivatives arbitragers Market makers Retail APPROVED INTERMEDIARY Clearing Houses THE SLB SEGMENT 2

3 Why Participate in Securities Lending & Borrowing? Lender s Motivation It provides lender incremental return on an idle portfolio Typical returns 8% -30% on lent portfolios Tax benefits - STT and SEBI T/O Tax not applicable. Transaction in SLB do not amount to transfer under Indian Income Tax Laws so no capital gains tax (Treated as other income) Borrower s Motivation To cover a short position : avoidance of settlement failure Hedging of futures & options positions Borrow and lend to reap benefits of the market sentiment THE SLBM IS FACILITATED BY THE NATIONAL SECURITIES CLEARING CORPORATION OF INDIA (NSCCL), THE CLEARING CORPORATION OF THE NATIONAL STOCK EXCHANGE OF INDIA (NSE). ALL THE BORROWING AND LENDING ARE CLEARED, SETTLED & GUARANTEED. THE SLB SEGMENT 3

4 SLB Mechanism Simplified Usually the maximum liquidity for borrowing and lending will be for 1 month. Lender Borrower T Day (12 expiries available) T+1 Day Sell and Early Pay Credit Received for Fees 125% of Lending Fee Margin levied Shares received am Interim Period Recall/Repay Option to Both Dividends etc to Lender Expiry Day (First Thursday of each month) Shares Credited Back Shares debited and margin released PL carries out an early payin of Securities offered in SLB on the day of trade itself. As a result, the stocks offered in SLB are reduced from the total holdings and the client will be able to see the correct holdings under - CDSL Holdings / Total Holdings as on date in PL Clients the next trading day. For further details please visit THE SLB SEGMENT 4

5 Where do we get Rates Nseindia.com > Live Market > SLB OUR BRANCHES ARE INFORMED REGULARLY ON HIGHLY TRADED SCRIPS AND LENDING RATES DURING THE DAY TO FACILITATE QUICK DECISION MAKING FOR YOUR ACCOUNT THE SLB SEGMENT 5

6 SLB Life Cycle Open a normal trading account with DP - POA with PL Sign An additional SLB rights and obligations agreement ( Express your intention to lend securities to your relationship manager or mail ftrms@ plindia.com with scrip/quantity/price details Order matching on the lending fees takes place similar to trading on an exchange. Daily MTM on the margin to ensure no borrower default risk. View your ledger/ holdings online at Depository charges applicable for debiting shares from your demat At the end of contract, lender gets back the stock and borrower margin is released. THE SLB SEGMENT 6

7 TAX BENEFITS - STT and SEBI T/O Tax not applicable. - Transaction in SLB do not amount to transfer under Indian Income Tax Laws so no capital gains tax. - Treated as other income and will be taxed as per applicable income tax slab rate. THE SLB SEGMENT 7

8 GET IN TOUCH CUSTOMER CONNECT DESK (MONDAY FRIDAY : 9 AM 6 PM) MAIL US AT CUSTOMERCONNECT@PLINDIA.COM THE SLB SEGMENT 8

9 DISCLAIMER This document has been prepared by PL and is meant for sole use by the recipient and not for circulation. The returns mentioned in this document are compiled based on simulation carried out on historical price data and not based on actual data. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. The document should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. Neither PL nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this document should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient s particular circumstances and, in case of doubt, advice should be sought from an independent expert/advisor. THE SLB SEGMENT 9