What Is Securities Lending And Borrowing (SLB)?

For investors, SLB is a means of borrowing and lending stock at a predetermined date and price. In order to borrow or lend the securities, lenders and borrowers must state the loan amount and the associated interest rate. Once the quotes at the exchange are in sync, the order will be processed. 

Short selling, borrowing, or selling the shares should be done immediately if a trader's research and gut instinct both indicate that the stock price will decline. 

They borrow money so they can profit from arbitrage situations that arise when a market for futures or options is mispriced. 

It is common practise to borrow funds in order to fulfil the physical delivery requirement of F&O trades. 

Securities lending is a common way for traders to supplement their earnings on investment. 

How Can Traders Check The Live Quotes And Place SLB orders? 

Traders can check the live prices of eligible securities on the NSE. And to place the order, generate a ticket, fill in the details like rate, quantity, security, and contract expiry month, and choose the security when placing a lending order. Traders can place their orders between 9 am to 5 pm. The order will be verified by exchange, and the confirmation memo is sent to the traders.

How Much Did The SLB Transaction Charge? 

The processing fee of SLB is twenty per cent of the total price and eighteen per cent of GST. “Best bid” price indicates the price at which stock can be borrowed, and “best offers” price shows the price at which stock can be lent. Moreover, traders can check SLB bids and offer for different months on the NSE.  

For example, if 50 shares of company XYZ are lent at the rate of Rs. 13 each. Given that the processing fee is charged at 20% and GST at 18%. 

So, the processing fee will be (50x13=650) = 20% of 650 = 130

The GST on processing fee = 18% of 130 = Rs. 23.4

Total SLB fee = 23.4+130 = Rs. 153.4 

How To Foreclose The SLB Position With The Repay/recall Option?

Borrowers don't have to wait until the conclusion of their settlement period to sell back their shares on the exchange. When this occurs, it is referred to as Repay in SLB, and the margin amount of the shares will be immediately reversed by the exchanges on the same day the shares are returned to the borrowers. 

Lender shares may be recalled at any time prior to the contract's expiration by submitting a Recall order. Even if the price and open orders are favourable, the exchange makes no promises to deliver the recalled shares. The stock might be recalled at the current market price if the trader needs the shares back quickly. 

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Can Traders Roll Over The SLB Position? 

Yes, traders can roll over their SLB position for over 11 months. A rollover means extending the contract for another 11 trading months by quitting the current month’s contract that is close to expiring. For example, if a customer transacted in the Feb contract and wished to extend the SLB position to the March contract, this can be settled using rolling over. And if there are no borrowers in the rollover series, the shares will be returned on the settlement day. 

On What Criteria Are SLB Orders Placed?

The minimum eligibility criteria for placing SLB orders are as follows:

• Lending - The order value per security must be Rs 1 lakh.
• Borrowing - A minimum of 500 shares order can be placed. 

Bottom Line 

On SLB orders, traders can lend and borrow the securities. Furthermore, traders cannot lend the pledged shares under SLB. Orders can be placed for only unpledged shares. Due to the illiquidity of BSE, SLB orders can only be executed on NSE on some exchanges.