The Central Depository (CDP), the securities clearing and depository division of SGX, will invite participation from investors who hold at least 50,000 of any eligible stock from an initial list of 200 S$-denominated stocks listed on the SGX Mainboard. Those who wish to be lenders will be required to send the application forms to CDP, indicating which securities they wish to lend and the respective quantities.
CDP will lend securities only to its Depository Agents (DAs), which comprise SGX member stockbroking firms, trust companies or bank nominees registered with CDP. CDP will charge DAs a borrowing fee of 6% per annum and administration fee of $20 per borrowing request. From this, CDP will pay lenders whose securities are eventually borrowed, a fee of 4% per annum on the value of the borrowed securities. Investors can borrow securities through the DAs, who will determine their own lending rates.
The borrowing period is T+3 business days, which coincides with the securities settlement cycle. Borrowers have the option to extend the loan for another T+3 business days, after which they may initiate a new loan.
As the counterparty to both lenders and borrowers, CDP assures the return of loaned securities.
Mr Ang Swee Tian, President of SGX said, "The launch of a securities lending facility is an important development for the Singapore market. It not only provides investors with additional income opportunities, but also helps improve investment and hedging opportunities for market participants, while paving the way for the development of an active equity options market. Ultimately, this will help to create a more sophisticated capital market structure which meets the changing needs of our customers."
The start of lending and borrowing activities is expected to begin by the end of the year.
In the next phase of the programme, targeted for mid 2002, CDP will develop strategic lending as a complementary facility. In strategic lending, the loan tenure, and borrowing and lending rates will not be pre-determined, but will be negotiable, depending on demand and supply.
