How the SLB system works

The proposed Securities Lending and Borrowing SLB system will be operated through the clearing corporation or clearing house of stock exchanges having nation-wide terminals who will be registered as Approved Intermediaries AIs. 8220;The SLB will take place on an automated, screen based, order-matching platform which will be provided by the AIs. This platform will be independent of the other trading platforms,8221; Sebi said.

All categories of investors including retail, institutional etc will be permitted to borrow and lend securities. The AIs, CMs clearing members and the clients should enter into an agreement which may have one or more parts specifying the rights, responsibilities and obligations of the parties to the agreement. There would be one master agreement with two individual parts to the same. The first part of the agreement would be between the AIs and the CMs and the second part of the agreement would be between the CMs and the clients. However, there will be no direct agreement between the lender and the borrower.

The AIs will allot a unique ID to each client which shall be mapped to the Permanent Account Number PAN of the respective clients. The AIs will put in place appropriate systemic safeguards to ensure that a client is not able to obtain multiple client IDs. 8220;To start with, contracts with tenure of 7 trading days may be introduced. The settlement cycle for SLB transactions should be on T1 basis. The settlement of lending and borrowing transactions shall be independent of normal market settlement,8221; Sebi said.

The market-wide position limits for SLB transactions will be 10 of the free-float capital of the company in terms of number of shares and no clearing member should have open position of more than 10 of the market-wide position limits or Rs 50 crore base value, whichever is lower.