The Central Depository (CDP), the securities clearing and depository division of SGX, has been building a lending pool of securities since 1 November 2001 by inviting investors to register as lending participants. As of 20 December 2001, the lending pool has a total market value of S$534 million and 892 lending participants. Lenders whose securities are eventually borrowed will be paid a fee of 4% per annum on the value of the borrowed securities.
CDP has also invited its Depository Agents (DAs), comprising SGX member stockbroking firms, trust companies or bank nominees registered with CDP, to register as borrowers. DAs will be charged a borrowing fee of 6% per annum and administration fee of $20 per borrowing request. Investors can borrow securities through DAs, who will determine their own lending rates.
Tax concessions will be given to qualifying lending transactions, according to the guidelines issued by the Inland Revenue Authority of Singapore (IRAS) on 23 November 2001. The transfer of securities and collateral under a securities lending arrangement will not be regarded as a disposal by the transferor of the securities, except in certain circumstances(Please refer to the IRAS website at http://www.iras.gov.sg/Circulars/securitieslending.htm for full details on the tax framework.)
Mr Thomas Kloet, CEO of SGX said, "The conducive tax framework, together with the encouraging response from investors, will pave the way for the development of a securities lending market in Singapore. We are pleased that CDP will be able to help develop this market. Besides providing investors with more flexibility in their investment strategies, securities lending represents an important step towards a more sophisticated capital market structure."
