Sebi asks AIs to enter into an agreement with CMs for the purpose of facilitating lending and borrowing of securities

Securities & Exchange Board of India (Sebi) has said that the Authorised Intermediary (AIs) shall enter into an agreement with Clearing Members (CMs) for the purpose of facilitating lending and borrowing of securities. The agreement shall specify the rights, responsibilities and obligations of the parties to the agreement.

These modifications in the Securities Lending and Borrowing (SLB) framework have been effected after taking into account suggestions made by the market participants.

The agreement shall include the basic conditions for lending and borrowing of securities as prescribed under SLB framework, Sebi said in a circular issued to the stock exchanges and depositories. AIs may also include suitable conditions in the agreement to have proper execution, risk management and settlement of lending and borrowing transactions with clearing member and client, Sebi said. Further, the exact role of AIs/CMs vis-vis the clients shall be laid down in the agreement, Sebi said. AIs shall ensure that there shall not be any direct agreement between the lender and the borrower.

The AIs shall frame a rights and obligations document laying down the rights and obligation of CMs and clients for the purpose of lending and borrowing of securities, Sebi said. The rights and obligation document shall be mandatory and binding on the CMs and the clients for executing trade in the SLB framework, added Sebi.

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