The Singapore Exchange (SGX) is introducing a new fee structure for lending listed securities that it hopes will provide greater choice for borrowers and boost volumes.
The trading venue plans to replace the current fixed rate for its securities borrowing and lending (SBL) programme with variable and more competitive rate structure.
SGX stated the new rates would make it more attractive for institutional investors to borrow, and could result in higher volumes.
Currently, over 450 securities worth SGD$2.5 billion are available for lending.
“Our enhanced SBL programme will give borrowers access to a wider range of securities, including small to mid-cap stocks, with real-time lending pool availability,” said Michael Syn, head of equities, SGX.
“By improving the rates, range and accessibility of our SBL programme, we are improving the mobility of loan collateral, better serving our clients as owners of this collateral, and promoting liquidity in the stock market.”
Under the existing SBL programme, the lending fee rate is fixed at 4% per annum, while the borrowing fee rate is 6% per annum. From 2 December, the borrowing rate for index stocks, REITSs and business trusts will be at 0.5%, and the rest of securities at 4%.
The changes follow previous enhancements to SGX’s securities lending programme, including the introduction of real-time processing of borrowing requests, and an expansion of borrowers’ eligibility criteria beyond clearing members and depository agents.
At the end of last year, SGX went live with a new securities post-trade framework, and a system enabling the transition from T+3 to a T+2 settlement cycle. However, this has proved to be operationally challenging for some lenders as a result of the earlier settlement requirements.