An SBL transaction involves connecting lenders and borrowers of shares for a predetermined period at a market-determined rate. It is a system where an investor borrows shares they do not own from a lender willing to lend those shares.
Lending and borrowing orders are submitted to CSE Clear for approval. Lending orders are validated for the Cleared Balance, while borrowing orders are validated for sufficient collateral by the borrowing Clearing Member.
Benefits of Stock Borrowing & Lending
- Enhances market liquidity by allowing investors to access securities they do not own, thereby facilitating trading strategies and improving market efficiency.
- Enables lenders to earn additional income by lending their securities to borrowers in exchange for a fee.
- Allows borrowers to use the borrowed securities for regulated short selling at the CSE, potentially profiting from declining market prices.
- Supports price discovery and contributes to more efficient markets by facilitating short selling, which can help correct overvalued stocks.
- Offers investors the ability to hedge their portfolios or manage risk—for example, by taking opposite positions to offset potential losses in other investments.