Securities Lending and Borrowing (SLB) is a mechanism through which clients can lend or borrow securities at a specified price and time. Lenders and borrowers can quote a lending fee and quantity at which they want to lend or borrow, and the order will be executed if the quotes match at the exchange.
Why borrow securities?
- Borrow and sell the stock immediately or short sell if the view is that the price of the stock will go down over a period of time.
- Take advantage of arbitrage opportunities when futures or options are mispriced.
- To fulfil physical delivery obligations for F&O trades. To know more about physical delivery, visit zrd.sh/physical-delivery-risk.
Why lend securities?
Investors can lend their securities to generate some additional return over and above their investment.
Eligibility criteria for lending and borrowing.
At Zerodha, the minimum eligibility criterion to place SLB orders is mentioned below:
Lending: The order value per security to lend is ₹1 lakh, below which orders will not be processed.
Borrowing: An order with a minimum of 500 shares must be placed.
To activate SLB, see How to activate and deactivate Securities Lending and Borrowing (SLB)?
Charges pertaining to SLB are explained here (PDF).
Did you know?
- The lender will be eligible for all corporate actions.
- The clearing and settlement of trades are handled and guaranteed by Indian Clearing Corporation Limited (ICCL).
- Only securities that are eligible for SLB can be lent and borrowed (Approved list).
- Like futures and options contracts, SLB contracts expire on the first Thursday of every month.
- Contract expiry is on the first Thursday of every month for whichever series it is traded on. In case of exchange holidays, the expiry will be on the next working day.
- DP charges of ₹13 + GST will be applicable when the shares are moved from demat for settlement. If the primary (first) holder of the account is a woman, the DP charges will be reduced to ₹12.75+ 18% GST.
- A processing fee of 20% on the lending and borrowing fee is applicable for completed orders.
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