Securities Lending & Borrowing through NCCPL

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Securities Lending & Borrowing (“SLB”)
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Securities Lending and Borrowing (SLB)
Introduction

SLB is defined as the temporary exchange of securities
with an obligation to redeliver the same securities in the
same number and at an agreed premium on a future date.

The potential lenders and borrowers can be the brokers,
banking companies, financial institutions, investment
finance companies and other person approved by NCCPL
and SECP.

All potential lenders/borrowers have to be the Clearing
Members of NCCPL.
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Securities Lending and Borrowing (SLB)
Why SLB?
 The motivation for lenders is:
 To earn income/return on their idle Securities.
 To utilize 100% amount of lent Securities.
 The motivation for borrowers is:
 To avoid delivery failure in ready/future market ; and
 To borrow SLB Eligible Security before affecting the short
sale
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Revised Features (SLB)

Revision in Cash Retention Methodology:
100% amount of SLB Transaction shall be paid to the
lenders on Settlement Date

Additional Mode of Collateral:
Margin Eligible Securities, Bank Guarantee, T-Bill, IUT
can be deposited for the purpose of Exposure Margin

Risk Management from Lenders:
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5
Brief Overview- SLB
To Manage Delivery Failure of Ready/Future Market

SLB facility provides effective solution for managing delivery
failures as per the following process:
 Clearing Member (“CM”) may borrow securities on Trade
Day from SLB market;
 NCCPL may also borrow securities upon receiving written
request from CM on the settlement date from SLB Spot
Market.
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Brief Overview- SLB
To Facilitate the Market Participants Affecting
Short Sales
 In case of short sale, CMs shall be required to borrow
securities from SLB Market before affecting short sale.
 Short sale and corresponding borrowing transactions shall
be settled on net basis on T+2, through NCSS whereby
delivery obligation becomes zero on settlement date.
7
SLB-Modus Operandi
 SLB market is available in parallel to the Regular Market.
 SLB is operating through an automated platform provided
by NCCPL as an Authorised Intermediary, to SLB
Participants (lenders and borrowers) for placing offers
and bids for SLB Eligible Securities to be lent and/or
borrowed.
 The Premium of lending and borrowing is determined by
the market forces on demand & supply basis. However,
such Premium is capped to KIBOR+8%.
 The SLB transactions are carried out on an undisclosed
basis in the SLB Market.
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SLB-Modus Operandi

The valuation of SLB transactions are done at the
immediate preceding price of the SLB Eligible Securities
exist in Ready market at the time of execution.

SLB Contract period is 22 working days. On 23rd day SLB
Contract shall be forced released.

Only borrower may release SLB contract at any given point
of time during 22 working days.

SLB Contracts shall be force released on a day before the
start of Spot Period of a particular SLB Eligible Security

The settlement of the SLB transactions shall be on T+2.
9
SLB-Modus Operandi

On Settlement Day of SLB Transaction, the lender is
required to deliver lended securities and borrower is
required to pay the total amount of borrowed securities.
However, in case of corresponding sale, the money
obligation of such borrower will be netted-off in NCSS;

Accordingly, 100% value of the lent securities paid to the
lender;

At the time of release of SLB Transaction (SLB-R), the lender
is required to pay 100% amount of the lent securities (after
adjustment of Premium, if any) and receive the lent
securities.
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SLB-Modus Operandi

At the time of release of SLB-R Transaction the borrower is
required to deliver the borrowed securities.

Accordingly, NCCPL will pay 100% amount to the borrower,
after the adjustment of premium.
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SLB-Risk Management

The borrower and lender shall pay VaR based
exposure margins in the form of Margin Eligible
Securities, Cash, Bank Guarantee, IUT and T-Bills to
NCCPL against SLB Transactions on pre-trade basis.

The marked-to-market losses shall be collected
from the borrower and lender on daily basis in the
form of Cash only.

Special Margins shall be collected from borrowers
in the form of Cash, Bank Guarantee, IUT and TBills only.
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Thank you !
NATIONAL CLEARING COMPANY OF PAKISTAN LIMITED
8th Floor, Karachi Stock Exchange Building,
Stock Exchange Road, Karachi – 74000 Pakistan
TEL : (92-21) 3246 0811-19 FAX: (92-21) 3246 0827
E-Mail :
[email protected]
Website :
http://www.nccpl.com.pk
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