SGX launches variable rates for securities borrowing and lending programme

Borrowing rates for index stocks, REITs, and business trusts will be changed from 6% to 0.5% per annum.

Starting from 2 December, Singapore Exchange (SGX) will replace the fixed rates for its Securities Borrowing and Lending (SBL) programme with variable and more competitive rates which will benefit both borrowers and lenders, SGX announced.

There are currently over 450 securities worth $2.5b available for loan, and under the present SBL programme, the lending fee rate is fixed at 4% per annum, whilst the borrowing fee rate is 6% per annum.

With the enhanced programme, the borrowing rates for index stocks, REITs and business trusts will be at 0.5% and the rest of securities at 4%. These rates will be reviewed on a periodic basis, taking into account factors such as market rates and demand and supply of the eligible securities. Lenders’ fees will be calculated based on 70% of the borrowing fee.

The new rates are intended to ease the borrowing terms for institutional investors, which could result in higher frequency of loans and in turn increase lenders’ chances of securities being lent out.

Prior to the changes of the rates, SGX have also boosted real-time processing of borrowing requests and expanded borrowers’ eligibility criteria beyond CDP members and depository agents, allowing entities licensed to deal in securities in selected foreign jurisdictions to also participate in the programme.

CDP account holders can register for the programme for free and have the opportunity to earn additional income from their securities holdings.