BOI SHAREHOLDING LIMITED
Sub. : Securities Lending and Borrowing Scheme (SLBS)
The members of Bombay Stock Exchange Ltd. (BSE) were informed vide Notice No.20071224-10 dated December 24, 2007 about the introduction of Securities Lending and Borrowing Scheme (SLBS) as specified by SEBI vide its Circular No.MRD/DoP/SE/Dep/Cir-14/2007 dated December 20, 2007.
In this connection, members of BSE are hereby informed that, the Clearing House of BSE i.e. BOI Shareholding Ltd. (BOISL), as the Approved Intermediary under the Securities Lending Scheme, 1997 announces the Securities Lending and Borrowing Scheme (SLBS) as per the broad framework specified by SEBI vide its aforesaid Circular No. MRD/DoP/SE/Dep/Cir-14/2007 dated December 20, 2007 and any other circular / guidelines that may be issued in respect of the same from time to time.
The salient features of the SLBS are as under :
Eligibility
Ø All trading / clearing members of BSE as well as Banks and Custodians shall be eligible to participate in SLBS, subject to fulfillment of the eligibility criteria specified by BOISL. For this purpose they shall, inter alia, have to register as SLB Member in SLBS with BOISL as per the registration procedure specified by BOISL.
Ø SLB Member desirous of lending or borrowing securities under SLBS can do so either on their own account or on behalf of their clients.
Ø SLB Member shall be required to enter into an agreement with BOISL and the clients shall be required to enter into back to back agreement with the SLB Member as per the formats specified by BOISL. The formats of the same shall be available shortly on the website of BSE.
Ø The SLB Member shall apply to BOISL for allotment of Unique Client ID for each client who desires to participate in SLBS.
Eligible Securities
Ø To begin with, the dematerialised securities traded in F & O Segment shall be eligible for lending and borrowing under SLBS. BOISL shall from time to time announce the addition / removal of the securities to / from the list of eligible securities.
Ø In case of Record Date or Closure of Register of Members of a Company, the securities will not be allowed for lending and borrowing under the SLBS during the period as may be decided by BOISL from time to time.
Lending and Borrowing transaction on screen based platform
Ø BOISL shall provide a separate screen based order matching platform to execute lending and borrowing transactions. A detailed circular in respect of such platform will be issued in due course.
Clearing & Settlement Procedure
Ø The settlement obligations for transactions under SLBS will be on gross basis i.e. there shall be no netting of transactions.
Ø Following market types are to be used for giving instructions to the Depositories for securities pay-in :
|
SLBS Pay-in |
Market Type |
|
For first leg pay-in of Securities (by lender) |
SLB |
|
For return leg pay-in (return of borrowed securities by the borrower) |
SLB-R |
|
For pay-in of securities in SLB Auction |
Buy-in Auction |
Ø The pay-in and pay-out of funds and securities shall be through the designated clearing bank account and securities settlement account respectively.
Ø The Clearing Bank accounts currently used by members of BSE in Cash Segment (Equity Market) shall be the designated bank account for settlement of funds obligations under the SLBS.
Ø For securities demat account the SLB Member may approach the depository participants in respect of Pool / Principal accounts for settlement of securities obligations under SLBS.
Ø The transactions under SLBS shall be settled on a T+1 day basis as per time lines specified by BOISL. The lender shall be required to deliver the securities by the scheduled time on T+1 day. Failure to deliver securities shall result in financial close-out. The close-out computation formula shall be intimated by way of a circular.
Ø For a borrow transaction the settlement obligation shall be the lending fees plus the lending price. The lending price shall be previous day’s closing price in Cash Segment of BSE.
Ø To start with, tenure of lending shall be seven trading days. Accordingly, the return of securities by the borrower shall be scheduled on T+8 day (where T is the SLBS transaction day).
Ø All SLB members shall be required to return the securities borrowed on completion of period of lending. The securities shall be returned to the lender of the securities by BOISL. In the case of borrower failing to return securities, BOISL shall conduct an auction for obtaining securities. In the event of exceptional circumstances resulting in non-availability of securities in auction, such transactions would be financially closed-out at appropriate rates. The close-out computation formula shall be intimated by way of a circular.
Ø BOISL shall specify the settlement calendar with respect to SLBS from time to time. A typical settlement cycle for a lending and borrowing transaction shall be as under :
Activities |
Timings |
|
T Day |
|
|
Securities Lending & Borrowing session |
10:00 am – 11:00 am |
|
Custodial confirmation |
by 2:00 pm |
|
Final obligation to participant |
3:30 pm |
|
T+1 day |
|
|
Pay-in of securities/funds – 1st leg |
9:30 am |
|
Pay- out of securities/funds – 1st leg |
11:30 am |
|
T+8 day |
|
|
Pay-in of securities of return leg |
9:30 am |
|
Pay-out of securities/funds of return leg |
11:30 am |
|
Buy-in auction for failure of borrower to return securities |
12:30 pm (approx.) |
|
Auction obligation to participant |
4:30 pm |
|
T+9 day |
|
|
Pay-in of securities for auction settlement |
9:30 am |
|
Pay-out of securities/funds for auction settlement |
11:30 am |
Margins and Collaterals
Ø All transactions in the SLBS shall be subject to levy of margins. The margins shall be levied at a client level. The details in respect of margin and collateral deposit are mentioned in Annexure-I.
Position limits
Ø As prescribed by SEBI, the position limits with respect to SLBS shall be applicable at various levels.
Ø To begin with, the position limits at the level of Market, SLB Member and Client shall be as follows:
a) the market wide position limit for transactions under SLBS shall be 10% of the free float capital of the company in terms of number of shares.
b) No SLB Member shall have open position of more than 10% of the market wide position limit or Rs.50 crore (base value) whichever is lower.
c) For a FII / MF the position limits shall be the same as that of a SLB Member.
d) The client level position limit shall not be more than 1% of the market wide position limit.
Shortages & Close-out
Ø In the event of fund shortages by the borrowers the SLBS transactions shall be cancelled as may be decided by BOISL and accordingly, the securities shall be returned to the lenders alongwith lending fees. In the event, lender fails to deliver securities in the settlement the transactions shall be closed-out. The computation methodology and rate of close-out shall be intimated by BOISL from time to time.
Ø In the event the borrower fails to return the securities BOISL shall conduct a “Buy-in Auction”. The buy-in auction shall be carried out in the Cash Segment of BSE.
Ø If the securities cannot be bought through the buy-in auction, then the transactions shall be closed-out. The computation methodology and rate of close-out shall be intimated by BOISL from time to time.
Ø In all cases of shortages BOISL may initiate various actions including withdrawal of borrowing and lending facility of the participant, withhold the securities / funds pay-out due to the participant or any other action as may be decided by BOISL from time to time.
Fines and penalties
Ø Fines and penalties shall be imposed on the SLB Members for defaults in delivery / return of securities or defaults in payment of funds or margin obligations or for violation of Unique Client Code requirements or for any other reasons as may be specified by BOISL from time to time.
Arbitration
Ø All claims, differences or disputes between the SLB Members and their clients arising out of transactions in SLBS shall be subjected to arbitration mechanism as intimated by BOISL from time to time
The detailed modalities with respect to implementation of SLBS and the effective date of implementation shall be communicated separately.
In case of any clarifications members may contact :
|
Name |
Contact Nos. |
|
Mr.Peter D’Souza – BOISL |
5042 |
|
Mr.Daniel Lasrado – BOISL |
5032 |
|
Ms.Avani Kulkarni – BOISL |
5065 |
|
Ms.Sheela Anjaria – BSE, Clearing and Settlement |
8149 |
|
Mr.Sanjay Narvankar – BSE, Clearing and Settlement |
8113 |
|
Mr.Surendra Rashinkar – BSE, Clearing and Settlement |
8306 |
|
Mr.Hitesh Desai / Mr.Yogesh Bambardekar – BSE, Dept.of Surveillance & Supervison |
8286 |
|
Mr.Amit Kadam – BSE, Membership |
8010 |
Monday, A. C. Gautam,
January 28, 2008 Managing Director - BOISL
Annexure - I
Collateral Deposits and Margins for transactions under SLBS:
The criteria in respect of composition of capital, computation and collection of margins would be as follows:
A. Composition of Capital (Liquid Assets):
Ø SLB Members may note that the capital deposited as collateral towards Base Minimum Capital and Additional Capital for Securities Lending and Borrowing are to be maintained in form of Cash and Cash equivalent only.
- Base Minimum Capital (BMC) :
o Base Minimum Capital of Rs.10 lakhs to be separately maintained by SLB Members for SLBs.
- Additional Capital (Liquid Assets) :
o In addition to the Base Minimum Capital the SLB Members may deposit additional capital in form of cash or cash equivalent only (i.e., Fixed Deposit Receipts of Banks and Bank Guarantee).
B. Margins :
Ø Margins shall be computed and collected as per the present system followed in the Cash segment (Equity Market). All participants in the Securities Lending and Borrowing shall be margined. BOISL would compute, collect and release various margins as follows :
§ VaR Margin and ELM Margin:
- VaR margin and ELM margin rates as applicable to the security in the cash segment of BSE at beginning of day rates shall be applicable in the SLBS.
- The VaR margin and ELM margin shall be collected on an upfront basis by adjusting against the collateral of the SLB Members at the time of transaction.
- The VaR margin and ELM margin shall be collected on the gross open position of the SLB Member. The gross open position for this purpose would mean the gross of all positions across all the clients of a SLB Members including its proprietary position
- VaR margin rates for SLBS shall be available on the website of BSE.
- The VaR Margin and ELM margin so collected shall be released on completion of pay-in of the respective settlement.
§ Mark to Market Margin:
- Mark to market margin shall be calculated by marking each transaction in security to the closing price of the security at the end of day in the cash segment of BSE. In case the security has not been traded on a particular day in the equity market, the latest available closing price at the BSE shall be considered as the closing price.
- The mark to market margin (MTM) shall be collected from the SLB Member at the end of day on T day.
- Such MTM will be collected from the SLB Members in the evening on the T day, first by adjusting the same from the available cash and cash equivalent component of the liquid assets and the balance MTM in form of cash from the SLB Members through their clearing banks on the same day.
- The MTM margin shall be collected on the gross open position of the SLB Members. The gross open position for this purpose would mean the gross of all positions across all the clients of the SLB Member including its proprietary position. For this purpose, the position of a client would be netted across its various securities and the positions of all the clients of a SLB Member would be grossed.
- There would be no netting off of the positions and setoff against MTM profits across two settlements. However, for computation of MTM profits/losses for the day, netting or setoff against MTM profits would be permitted.
§ Fixed percentage on lend / borrow transactions
ù In addition to the aforesaid margins, the collateral deposits of the SLB Members will also be blocked upfront towards the following:
o In case of both the borrower and lender, a fixed percentage of lending price shall be levied as margins. Such margins will be collected on an upfront basis by adjusting against the collateral of the SLB Member. To begin, with the fixed percent shall be 25%.
§ Lending fee amount
o In case of the borrower, lending fees amount based on the actual transacted value shall be blocked upfront against the collateral.
§ Custodial transactions
o In respect of transactions entered by a SLB Member which is to be settled by a custodian, the margins from the time of transactions till confirmation by the custodian shall be levied on the SLB Member. On confirmation of the said transactions by the custodian, the custodian shall be levied the margins applicable on such transactions.
o In case of rejection by the custodian, the margins on the transaction rejected shall continue to be levied on the SLB Member.
§ Release of margins :
ù SLB Members may note that:
o All margins shall be applicable at client level.
o Both lender and borrower shall be levied margins in respect of first leg of transaction in the SLBS.
o The borrower shall also be levied margins in respect of return leg of transactions in SLBS.
o Margins as collected above shall be released after completion of pay-in of respective settlements.
§ Exemption from margins :
o Exemption from margins shall be available in case where early pay-in of securities is made by the lender of securities. |