NSE Clearing will introduce R3 SLB contracts from August 17 with T+3 reverse-leg settlement.
New contracts will be available daily for stocks eligible in the equity derivatives segment.
R3 contracts will exclude foreclosure, repay, recall and rollover facilities.
NSE Clearing To Introduce 3-Day SLB Contracts From August 17
New R3 series will allow eligible stocks to be lent and borrowed with a T+3 reverse-leg settlement cycle
NSE Clearing To Introduce 3-Day SLB Contracts From August 17
Summary
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NSE Clearing will introduce shorter-tenure contracts under the Securities Lending and Borrowing (SLB) Scheme from August 17, allowing market participants to execute stock-lending transactions with a three-day settlement cycle.
The new contracts will be introduced under the R3 series and made available on a daily basis, NSE Clearing said in a circular dated August 14.
Under the new structure, the first leg of an SLB transaction executed on the transaction day (T Day) will continue to be settled on T+1 day, while the corresponding reverse leg will be settled on T+3 day, excluding settlement holidays.
The shorter-tenure contracts will be available only for stocks that are eligible for trading in the equity derivatives segment.
New R3 Series For Shorter-Tenure Transactions
Unlike existing SLB contracts, the R3 contracts will not be foreclosed in the event of an Annual General Meeting (AGM) or Extraordinary General Meeting (EGM).
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The facilities of repay, recall and rollover will also not be available for these shorter-tenure contracts.
All other provisions relating to market timings, clearing and settlement, risk management and corporate action treatment will remain the same as those applicable to existing SLB contracts.
The R3 series will be available from August 17, with contracts being introduced on a daily basis.
What Is Securities Lending And Borrowing?
The Securities Lending and Borrowing Mechanism (SLBM) is a framework that allows investors to lend securities they hold to other market participants for a specified period in exchange for a lending fee.
The mechanism can be used by investors seeking to earn additional income from their securities and by traders who need to borrow shares, including for short-selling.
Under an SLB transaction, the borrower pays a lending fee to the lender for using the securities. The exchange and clearing corporation provide infrastructure for matching transactions and managing collateral, settlement and other risks.
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The introduction of the R3 series provides market participants with a shorter holding period for securities lending transactions compared with longer-tenure SLB contracts.
This could give traders and investors greater flexibility in managing short-term borrowing and lending requirements.