The CSD in Poland, the National Depository for Securities (NDS), is seeking comments on the organization and pricing of a new intra-day securities lending service.
According to Darius Domaradzki, head of custody at HVB-owned Bank BPH in Warsaw, intraday securities loans will be processed in the same way as the existing automatic securities lending system. However, banks are pressing for a reduction in the level of required collateral in case of the most liquid equities.
According to the NDS proposals, the cost of intraday securities lending would be PLN 50. This sum will apply per loan: if several lenders are involved, the borrower will have to pay multiple amounts. To encourage market participants to issue trade instructions earlier, NDS is also proposing to charge settlement fees that are three times higher than the standard settlement fee for instructions if the instructions are sent later than Settlement Date (SD) -1 6:30 p.m. and five times higher in case of instructions sent after SD 10:30 a.m. However, NDS confirmed that it will simultaneously lower the fee for suspended trades to 0.3% of the transaction value, with a minimum of PLN 500 (for both the regulated and non-regulated market) and the fee for automatic securities lending to 0.1% of the transaction value (with a minimum of PLN 500). Domaradzki points out that 80% of the fees for both intra-day and overnight loans are transferred to the lender.
“All these changes are expected to be officially approved at the next meeting of the NDS Management Board,” says Domaradzki. “The introduction of intraday securities lending is expected to improve the settlement process throughout the day and to reduce the number of late settlements. Lower fees for overnight loans and suspended trades – as proposed by the CBC in 2004 – will reduce needless costs paid by the market participants.”