SGX to replace fixed rates for securities borrowing and lending with variable rates from Dec 2

WITH effect from Dec 2, Singapore Exchange (SGX) will replace the fixed rates for its securities borrowing and lending programme with variable and more competitive rates, which will benefit both borrowers and lenders, the local bourse said in a press statement on Wednesday. 

Under the current programme, the lending fee rate is fixed at 4 per cent per annum, while the borrowing fee rate stands at 6 per cent per annum. 

From next Monday, the borrowing rate for index stocks, Reits (real estate investment trusts) and business trusts will be at 0.5 per cent, while the borrowing rate for the rest of the securities will be at 4 per cent. Lenders' fees will be calculated based on 70 per cent of the borrowing fee.

These rates will be reviewed periodically, taking into account factors such as market rates, and demand and supply of the eligible securities, SGX said. 

The new rates make it more attractive for institutional investors to borrow, which could result in a higher frequency of loans, and increase lenders' chances of securities being lent out, the bourse operator added. 

There are over 450 securities worth S$2.5 billion available for loan.

From Dec 2 onwards, any securities on loan will continue to be on loan at the enhanced 70 per cent of the prevailing borrowing rate.

CDP account holders may also register for the programme for free, and have the opportunity to earn additional income from their securities holdings, SGX noted. 

Securities lending is the temporary transfer of securities from a lender to a borrower for a fee. The borrower is obliged to return equivalent securities to the lender at the end of the loan period, or upon termination of the loan.

A CDP securities account holder can participate as a lender under the programme. As a lender, CDP will pay a lending fee if one has the eligible securities selected by CDP to be borrowed. According to SGX, one may register as a lender now even if he/she does not currently own any eligible securities, or the requisite quantity of eligible securities.

"Once your securities holdings meet the eligibility criteria, CDP may borrow your securities when there is demand," SGX said. 

The full list of eligible securities along with the indicative rates are available at https://www1.cdp.sgx.com/sgx-cdp-web/lendingpool/show.

This latest move follows prior enhancements to the programme, such as real-time processing of borrowing requests, and an expansion of borrowers' eligibility criteria beyond CDP (Central Depository) members, allowing entities in selected foreign jurisdictions to also participate in the programme.

Michael Syn, head of equities at SGX, said: "Our enhanced SBL (securities borrowing and lending) programme will give borrowers access to a wider range of securities, including small to mid-cap stocks, with real-time lending pool availability.

"We also provide instant delivery of loaned securities, with no minimum borrowing value, and a low minimum borrowing period of two days. By improving the rates, range and accessibility of our SBL programme, we are improving the mobility of loan collateral, better serving our clients as owners of this collateral, and promoting liquidity in the stock market."