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SLBM: Stock Lending And Borrowing Mechanism

SLB or stock lending and borrowing is a system in which a trader can borrow shares that they do not already own or can lend the stocks that they own.

An SLB transaction has a rate of interest and a fixed tenure.

Securities lending and borrowing Mechanism

Why do traders do stock lending & borrowing?

Lenders – Lenders can earn extra income by lending the stocks from their portfolio.

Borrowers – Borrowers can borrow the stocks for arbitrage, for short selling or to avoid the physical delivery.


Benefits of SLB

Additional Income – Generate additional income from the idle portfolio.

Multiple stocks – securities on which derivatives are available in the F&O segment are available in slb segment.

Enables short sell – In case you have a bearish view on a stock, you can short sell the stock by borrowing the stock from SLB.

No counter party risk – Securities lending and securities borrowing transactions are guarantee by NSCCL. NSCCL act as a financial guarantor for SLB product.

Avoid physical settlement – No issues of physical settlement has you can borrow the stock from slb and avoid physical settlement.


How to get started

To apply for privilege offline – Click here

To apply online – Follow given path - Login > New product > segment access > SLB

Why SLBM?
  • Hedging mechanism
  • Enhances liquidity
  • Convenience of online trading
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+ Expand AllFrequently Asked Questions (FAQs)

  • QWhich stocks I can lend in SLB?
    APresently securities on which derivatives are available in the F&O segment are available for transactions in SLB.
  • QWhat is the settlement date for SLB contract?
    ASLB contract settles on first Thursday of every month.
  • QCharges for the slb transaction.
    ABrokerage of 15% plus GST will be levied on the lending fee.
  • QWhat are the various margins applicable to the borrower & lender on T Day?
    A In case of borrower only the lending fee is levied upfront as margin. b) In case of lender, 25% of the lending price (T-1 cash market closing price) and Mark to market (MTM) at end of day are charged to the lender. These margins are not applicable to lender in case if lender does Early Pay-in of securities.
  • QWhat margins are applicable to the borrower & lender from T+1 to reverse leg settlement day (Reverse Leg)?
    ANo margins are levied on the lender.
    100% of lending price, Value at Risk margins, Extreme Loss Margins (same as applicable in Cash market for buying or selling a security) and EOD MTM are levied on the borrower.
  • QWhat are the counter party risk in SLB
    ANSCCL (National Security clearing co-operation limited) act as an financial guarantor for the slb , hence the risk is cover by them.
  • QWhat is Rollover, recall & repay option.
    ARollover is an option where client can rollover (shift) the current month position to next month.
    Recall is an option where client can recall the shares before the end of contract.
    Repay is an option used by borrowers to repay the shares before the contract expiry.
  • QWhat happen in case dividend is announced between slb contract.
    AAll the benefits will be forwarded to the lenders.
  • QWhen will the shares leave lenders demat
    AShares lent will exit the lenders demat on T day itself.
  • QWhat is the minimum and maximum contract duration for SLB.
    AMinimum Contract is for one month and maximum contract is for 12 months.
  • QCan NRI client do both lending & borrowing ?
    ANo NRI client can only do lending.

For more details kindly visit NSE SLB FAQ Page given below.
https://www1.nseindia.com/content/slbs/slbs_faqs2010.pdf