The Securities and Exchange Board of India (SEBI) has said that liquid index ETFs are eligible for trading in the securities lending and borrowing (SLB) segment.
Index ETFs shall be deemed liquid provided the Index ETF has traded on at least 80% of the days over the past six months and its impact cost over the past six months is less than or equal to 1%. Positions limits for SLB in respect of ETFs shall be based on the assets under management of the respective ETF.
SEBI is also allowing lenders or borrowers to roll over their positions on existing lent or borrowed positions. This means that lenders who are due to receive securities in the pay out of an SLB session may extend the period of lending. Similarly, a borrower who has to return borrowed securities in the pay-in of an SLB session, may, through the same SLB session, extend the period of borrowing. However, the rollover shall not permit netting of counter positions, i.e. netting between the borrowed and lent positions of a client. The rollover shall be available for a period of three months i.e. the original contract plus 2 rollover contracts.
The latest move follows SEBIs decision in August to extend the tenure of securities lending and borrowing transactions to 12 months from the existing 27-weekly/monthly series, with a range from one week up to 12 months. In the same month, Indias insurance regulator published guidelines for life and non-life insurance companies to participate in securities lending and borrowing (SLB) and reverse repo and repo transactions in government and corporate debt securities. The draft guidelines say insurers can lend only up to 10% of their total equity holdings in SLB transactions.
(JDC)