Nse, Shcil Plan Stock Lending Via Clearing Corp

The National Stock Exchange (NSE) and the Stock Holding Corporation of India are working out a stock lending arrangement under which shares can be borrowed by NSE members from SHCIL through the clearing corporation. R H Patil, managing director of NSE, told Business Standard that the members can borrow securities in case of delivery shortages for settlement through this scheme.

"SHCIL will lend securities for shortage purposes. When a member is short of deliveries, he will request for securities to be delivered to the clearing corporation. The clearing corporation is supposed to make payment to the broker. The arrangement with SHCIL comes into operation here. The money due to broker will be paid directly to SHCIL by the clearing corporation," Patil said.

 

He added that the scheme can be used other way round too wherein a broker directly makes payment to SHCIL and SHCIL in turn delivers shares to the clearing corporation on his behalf in case of shortages. The clearing corporation which guarantees all trades will bear the risk.

Patil added: "This arrangement can be used to eliminate unnecessary auctions. For example, suppose a member does not receive shares from a client based outside member on time, shares will go for auction. With this scheme in place, he can borrow securities from SHCIL through the clearing corporation." SHCIL has already submitted its proposal for acting as a stock lending intermediary to the regulator. R Chandrasekharan confirmed the tie up with clearing corporation.

He said: "We will enter into a standing arrangement with the NSE clearing corporation through which we will lend securities to NSE members. This is likely to smoothen the auction settlement wherein the three day gap between auction pay-in and pay-out can be curtailed."SHCIL has also set up an internal panel to work out the modalities of the new arrangement with SHCIL. The panel includes among others B D Shah, M R Mayya, R H Patil, B G Daga and K N Atmaramani.

Chandrasekharan said: "The committee will work out operational modalities for us taking into account the positions in the market, risk management involved, collaterals that can be accepted, the purpose of lending securities and so on."

The NSE clearing corporation as a separate entity will also apply for the intermediary status for stock lending. Patil said: "We will soon submit our scheme to Sebi. Brokers have to transfer securities in the name of the clearing corporation. Now, we can use these securities for lending if there are members who intend to borrow from the clearing corporation."