SGX adds variable rates to securities lending programme
27 November 2019 Singapore
Image: Shutterstock
The Singapore Exchange (SGX) is set to introduce variable and more competitive rates to its securities lending programme in a bid to attract more institutional investors to borrow.
According to SGX, this could result in higher frequency of loans and in turn increase lenders’ chance of securities being lent out.
Under the current programme, the lending fee is fixed at 4 percent per annum, while the borrowing fee rate is 6 percent per annum.
From 2 December this will change to 0.5 percent for index stocks, real estate investment trusts and business trusts and the rest of securities at 4 percent.
These rates, SGX said, will be reviewed on a periodic basis, taking into account factors such as market rates and demand and supply of the eligible securities.
Meanwhile, lenders’ fees will be calculated based on 70 percent of the borrowing fee, meaning that, once the new rates are introduced, any securities on loan will continue to be on loan at the enhanced 70 percent of the prevailing borrowing rate.
SGX noted that these latest changes follow a series of enhancements to its securities lending programme, such as real-time processing of borrowing requests.
Additionally, the exchange also recently added an expansion of borrowers’ eligibility criteria beyond central depository programme members and depository agents.
Commenting on the latest enhancements, Michael Syn, head of equities at SGX, said that the programme improvements will give borrowers access to a wider range of securities, including small to mid-cap stocks, with real-time lending pool availability.
“By improving the rates, range and accessibility of our securities lending 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,” Syn added.
According to SGX, this could result in higher frequency of loans and in turn increase lenders’ chance of securities being lent out.
Under the current programme, the lending fee is fixed at 4 percent per annum, while the borrowing fee rate is 6 percent per annum.
From 2 December this will change to 0.5 percent for index stocks, real estate investment trusts and business trusts and the rest of securities at 4 percent.
These rates, SGX said, will be reviewed on a periodic basis, taking into account factors such as market rates and demand and supply of the eligible securities.
Meanwhile, lenders’ fees will be calculated based on 70 percent of the borrowing fee, meaning that, once the new rates are introduced, any securities on loan will continue to be on loan at the enhanced 70 percent of the prevailing borrowing rate.
SGX noted that these latest changes follow a series of enhancements to its securities lending programme, such as real-time processing of borrowing requests.
Additionally, the exchange also recently added an expansion of borrowers’ eligibility criteria beyond central depository programme members and depository agents.
Commenting on the latest enhancements, Michael Syn, head of equities at SGX, said that the programme improvements will give borrowers access to a wider range of securities, including small to mid-cap stocks, with real-time lending pool availability.
“By improving the rates, range and accessibility of our securities lending 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,” Syn added.
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