|Participants in the SGX Securities Borrowing and Lending (SBL) Programme, take note: From 2 Dec 2019, you will pay or receive fees that vary according to factors such as the supply and demand of the securities.
Currently, the borrower pays a fixed 6% per annum, which translates into the lender receiving 4% and Central Depository, 2%.
SGX said the 6% rate is generally higher than charged by other SBL providers -- and thus a deterrent for borrowers whose shares are kept at CDP.
(Generally speaking, by the way, borrowers are shortists).
SGX said that with the upcoming switch to variable rate pricing, it expects a higher frequency of loans, which would increase the chances of lenders' securities being lent out.
In a letter to SBL participants, SGX also said it is tweaking another aspect of the fee structure: Lenders will get a fixed 70% of the borrowing fee, which is higher than the current 66.67% (4% lending fee) of the borrowing fee.
In essence, it is a slightly higher percentage of a likely lower fee.
What will happen to your securities which are currently on loan?
Come 2 Dec 2019, existing loans switch over seamlessly to the new fee structure.
In other words, your income as a lender will be 70% of the prevailing borrowing rate that kicks in (and whatever borrowing rate that may fluctuate going forward).
|By the way ...
• if you have not joined the SBL programme, the form is here. It's passive income for stocks that you generally consider longer-term holding and don't mind lending out to shortists or whoever.
• check out the current pool of shares available at CDP here.
• check out our 2012 story (a bit old but the relevance is there): Great Way to earn nice passive income on your shares