Circular, CIR/MRD/DP/19/2014,
dated 03rd June, 2014
Review of the Securities Lending and Borrowing (SLB)
Framework
1. Securities Lending and Borrowing
was introduced vide circular no. MRD/DoP/SE/Dep/Cir-14/2007 dated December 20,
2007 and operationalised with effect from April 21, 2008. The SLB framework has
been subsequently modified from time to time.
2. With regard to the requirement
of an agreement between Clearing Member and client for the purpose of lending
and borrowing of securities, representations were received from market
participants. Based on the examination of suggestions received, it has been
decided to modify the extant SLB framework.
3. Accordingly, para 6 of the
Annexure 2 of aforesaid SLB circular shall be replaced as under:
3.1. The Authorised Intermediary (AIs)
shall enter into an agreement with Clearing Members (CMs) for the purpose of
facilitating lending and borrowing of securities.
3.2. The agreement shall specify the
rights, responsibilities and obligations of the parties to the agreement. The
agreement shall include the basic conditions for lending and borrowing of
securities as prescribed under SLB framework. Further, the exact role of
AIs/CMs vis-à-vis the clients shall be laid down in the agreement. AIs shall
ensure that there shall not be any direct agreement between the lender and the
borrower.
3.3. In addition to that, 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.
3.4. 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. The rights and
obligation document shall be mandatory and binding on the CMs and the clients
for executing trade in the SLB framework.
4. All other conditions as
specified in the circulars no. MRD/DoP/SE/Dep/Cir- 14/2007 dated December 20,
2007, MRD/DoP/SE/Cir-31/2008 dated October 31, 2008, MRD/DoP/SE/Dep/Cir-01/2010
dated January 06, 2010, CIR/MRD/DP/33/2010 dated October 07, 2010
CIR/MRD/DP/30/2012 dated November 22, 2012 and CIR/MRD/DP/ 18 /2013 May 30,
2013 remain unchanged.
5. Stock Exchanges and Depositories
are advised to:
5.1. Take necessary steps and put in
place necessary systems for implementation of the above.
5.2. Make necessary amendments to the
relevant bye-laws, rules and regulations for the implementation of the above
decision.
5.3. Bring the provisions of this
circular to the notice of the member brokers of the stock exchange and
depository participants to disseminate the same on their website.
6. This circular is being issued in
exercise of powers conferred under Section 11 (1) of the Securities and
Exchange Board of India Act, 1992 to protect the interests of investors in
securities and to promote the development of, and to regulate the securities
market.
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