Right Of Recall Over Securities Lending Agreements

In some less mature markets, such as Korea, the custodian has managed to capture much of LBL`s local market. However, in more mature markets such as Singapore, the largest players in the sector are already supplied. These players most often have global operations and are looking for counterparties that have a global offer; In addition, they have integrated systems and standard global practices. The local repository, which offers only local stocks and cannot necessarily meet global practices, may not be an attractive counterparty. Therefore, in mature markets, deposit can, at best, benefit only from a marginal segment of smaller players. Nevertheless, in some very important markets, deposits with a sophisticated offer, such as Crestco or Euroclear, seem to have developed a flourishing SBL business. The SBL fees paid by the borrower to the lender vary depending on the type of securities lent. For example, in December 2003, typical commissions on the UK market were between 6 and 100 basis points per year for UK FTSE 100 equities, 10 to 400 basis points for UK FTSE 250 equities and 3 to 13 basis points for non-indexed gold (government securities), with most transactions ending at the lower end of this range. Other factors, such as the borrower`s creditworthiness, the length of the loan and the nature of the guarantees, also affect the fees. Credit transactions are generally more than $250,000, although specialized agencies may have minor holdings. After trading, the transaction must be validated in writing or electronically, if possible on the trading date. Details include contract and settlement dates, details of borrowed securities, the identities of lenders and borrowers, acceptable guarantees and margin percentages, duration and interest rates, bank account details and settlement details of lenders and borrowers. Significant changes made over the life of the transaction, such as .

B safety replacement, are agreed between the parties as soon as they occur. The loan can be opened or “on demand” for a fixed term or, as a rule. Lenders can sell open loan securities because they can usually recall the borrower`s securities during the market settlement period. SGX brokers are the main borrowers. Most of them participated in the program. Most of their loans are second- and third-tier retail loans. Credit sizes are usually small with an average of 60,000 to 70,000 shares per transaction. Custodian banks rarely participate because they have their own lending machines and are not interested in small deals. Securities lending is the temporary transfer of securities on a guaranteed basis.

In many markets, this is an important activity that helps increase liquidity, reduce spreads and improve risk management. Most of LBL`s activities take place in the over-the-counter market, so volume statistics are not readily available. However, it is assumed that the balance of securities on loans worldwide exceeds $1.7 trillion, or 10 to 12 per cent of eligible assets, and that lending activities generate annual revenues of $3.2 billion for lenders and agents.3 Securities lending is important for short selling in which an investor borrows securities and sells them immediately.