Securities Lending and borrowing (SLB) allows a trader to borrow and lend shares. The exchanges allow the traders to earn a profit by leveraging their DEMAT holdings. Most futures and options segment securities are eligible for SLB activities.

What Is Securities Lending And Borrowing (SLB)?

SLB is a method that allows traders to borrow or lend shares at a fixed time and price. Lenders and borrowers have to quote lending quantity and fee for lending or borrowing the securities. The order will be executed when the quotes match with one another at the exchange.

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• If a trader has intuition and their research shows that the stock price will decrease over time, they should short-sell, borrow, or sell the stock immediately.
• They borrow to benefit from arbitrage opportunities when futures or options are mis-priced.
• Borrowing is done to satisfy the physical delivery obligation of F&O trades.
• When traders want to generate extra returns over their initial investments, they often lend their securities.

How Can Traders Check The Live Quotes And Place SLB orders?

Traders can check the live prices of eligible securities on the NSE. And to place the order, generate a ticket, fill in the details like rate, quantity, security, and contract expiry month, and choose the security when placing a lending order. Traders can place their orders between 9 am to 5 pm. The order will be verified by exchange, and the confirmation memo is sent to the traders.

How Much Did The SLB Transaction Charge?

The processing fee of SLB is twenty per cent of the total price and eighteen per cent of GST. “Best bid” price indicates the price at which stock can be borrowed, and “best offers” price shows the price at which stock can be lent. Moreover, traders can check SLB bids and offer for different months on the NSE.

For example, if 50 shares of company XYZ are lent at the rate of Rs. 13 each. Given that the processing fee is charged at 20% and GST at 18%.

So, the processing fee will be (50x13=650) = 20% of 650 = 130

The GST on processing fee = 18% of 130 = Rs. 23.4

Total SLB fee = 23.4+130 = Rs. 153.4

How To Foreclose The SLB Position With The Repay/recall Option?

The borrowers can easily return their shares on the exchange without waiting for the end of their settlement period. This is known as Repay in SLB, and exchanges will directly reverse the margin amount of the shares on the same day the shares are returned to the borrowers.

And when the lender wishes to get their shares back before the contract expires, they can opt to get their shares back by placing the Recall order. However, the recall shares are not guaranteed by the exchange to deliver, as they depend on price and open orders. If the trader wants the shares back urgently, they can recall them at the market price.

Can Traders Roll Over The SLB Position?

Yes, traders can roll over their SLB position for over 11 months. A rollover means extending the contract for another 11 trading months by quitting the current month’s contract that is close to expiring. For example, if a customer transacted in the Feb contract and wished to extend the SLB position to the March contract, this can be settled using rolling over. And if there are no borrowers in the rollover series, the shares will be returned on the settlement day.

On What Criteria Are SLB Orders Placed?

The minimum eligibility criteria for placing SLB orders are as follows:

• Lending - The order value per security must be Rs 1 lakh.
• Borrowing - A minimum of 500 shares order can be placed.

Bottom Line

On SLB orders, traders can lend and borrow the securities. Furthermore, traders cannot lend the pledged shares under SLB. Orders can be placed for only unpledged shares. Due to the illiquidity of BSE, SLB orders can only be executed on NSE on some exchanges.

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