The SLBs avenue

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gain and further it would add to the returns. There are some of those who had not yet converted their physical shares into dematerialisation. Now they may feel the need to convert. Through securities lending investors can enhance their portfolio returns by lending their securities for a fee other than capital appreciation. This fee could be in the approximate range of 15-30% per annum depending on demand and supply factors.

Trading opportunity

SLBS has opened another parallel market to trade other than the cash market and F&O, and gave traders the opportunity to earn on a daily basis. Due to introduction of SLBS, which has a different screen-based platform, traders can lend and borrow on the same day and can gain from the appreciation. However, netting of two positions cannot be done in SLBS unlike in derivatives, where if one takes a simultaneous long and short position, they have to pay the net obligation and not gross. You can also gain from arbitrage opportunity.

International scenario

In the international market, trades in SLBS are conducted over-the-counter (OTC) completely opposite from India's system. The OTC market functions on bi-lateral contractual agreements between the participants. Due to this, world-wide securities market regulators don't generally seen to be directly involved in regulation of securities lending transactions. Just the periodical reports are submitted to entities like central banks, clearing corporations, depositories, etc. Some emerging markets like Hong Kong, Korea, Singapore depositories and custodians provide an electronic platform for executing the transactions.

Domestically, mutual fund houses are looking at SLBS as a platform to launch new fund offers with an objective to earn long-term capital appreciation by long and short positions in equity and equity-related securities. Once the lending and borrowing mechanism picks up, one can expect fund houses coming out with new schemes.