The SLBs avenue

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is on a price time priority. However, the market timing is available from 10 am to 11 am when the lender and borrower can come and trade in SLBS.

As earlier stated, the lending and borrowing settlement tenure is for T+8 unlike T+2 in the cash market and one month in futures and options (F&O). In this settlement period two transactions are executed. First is the lending part where shares are transferred from lender to borrower. This transaction is known as first leg and the settlement period is T+1.

Second is the obligation part or the reverse leg, where the borrower returns the requisite number of shares of specified security to the lender. The settlement day for reverse leg is T+8. One thing to note here is that the borrower has to buy the security from the cash market on T+5 day ,only then will the shares come on T+7 and subsequently can be delivered on T+8.

Margins

Other than the settlement period, margins are to be kept by both the parties with the respective participants in the first leg and in the reverse leg only the borrower has the obligation to pay the margins. The rationale behind the margin payment in the first leg is to avoid default because after the transaction, both the lender and borrower have the obligation to give the securities and funds respectively.

Later, the margins are released instantly after the pay-in and pay-out is completed on T+1. After this, the lender gets his fee and is not obligated to pay anything. So no margin is levied afterwards. But the borrower has the obligation to give back the shares, so except the lending fee margin, all others are continued till the reverse leg is executed.