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                                             “Best Equity House in India”




Stock Lending & Borrowing
Scheme
                                                                            1
                                Investment Opportunity

• Stock lending can provide      Stock Lending & Borrowing Scheme
  an additional source of
  income on the existing         •       Investors with a long-term stock portfolio, now have an opportunity to earn risk
  portfolio, without taking              free additional returns on their portfolio of stocks.
  market or counter-party
  risk.                          •       This can be achieved by lending their stocks through the Stock Lending and
                                         Borrowing Scheme (SLBS) launched by NSE.
                                 •       All stocks which are part of Futures & Options segment of NSE can be
                                         borrowed or lent in SLBS.
                                 •       The clients remain the beneficial owners of their shares and will be entitled for
                                         the corporate benefits like Dividends and Stock Splits.
                                 •       Further, the risk is mitigated as the trades are guaranteed by NSCCL, so the
                                         client will not be bearing any counter-party or credit risk.
                                 •       Any investor having a stock portfolio can earn additional return by lending the
                                         stock through JM Financial Services after registration.
                                 •       The lender will receive a lending fee, which will be determined by market forces.
                                 •       Through the “Early Recall" facility, the investor also enjoys the liberty to
                                         withdraw from lending* if he wants to sell the stock.




                              *Subject to cost
                                                                                                                             2
                                Key Features of SLBS

• Counter party risk
  mitigated as the settlement   •   The client will have to enter into an agreement with JM Financial Services as
  of trades are guaranteed          per the format specified by NSCCL.
  by NSCCL the clearing
  corporation/house.            •   JM Financial Services will apply to NSCCL for allotment of a unique client ID for
                                    each client, who desires to participate in SLBS and has completed the
                                    agreement documentation.
                                •   The eligible securities for lending will be the scrips trading in F&O segment of
                                    NSE.
                                •   The lending orders will be executed through a screen based, order-matching
                                    platform provided by NSCCL.
                                •   The tenure of lending and borrowing ranges from 1 month up to a maximum
                                    period of 12 months.
                                •   The return of securities by borrower is scheduled on the respective reverse leg
                                    settlement day, which is first Thursday of every month.
                                •   The trading window for the SLBS session will be from 9:15 am– 3:30 p.m




                                                                                                                        3
                          Process Flow for Trading
Critical Factors
                          •   The client will have to sign up an SLBS agreement before lending shares in the
                              SLBS segment
• SLBS opportunities      •   The client needs to open his DP A\c with JM Financial Services and transfer his
  may be short lived.         share holding to his DP account with JM Financial Services.
                          •   The client will have to place an order for lending of shares in the SLBS segment
• Quick decision making       of NSE in the normal market timings (9.15 am –3.30 pm).
  and prompt response     •   The client will receive a “SECURITIES LENDING &                    BORROWING
  is required.                CONFIRMATION MEMO” evidencing details of the SLBS trade.
                          •   The client will receive lending fee on (T+1) basis and the shares will be returned
• DP operation of stock       to his DP account on the respective reverse leg settlement day + 1 day, i.e first
  transfer to happen          Friday of a month.
  within 15 minutes of    •   All transactions in case of corporate actions other than dividend and stock split
  closure of market           will be foreclosed 2 days prior to ex-date.
  hours.
                          •    In case of dividend, the amount will be collected from the borrower by NSCCL
                              and will be paid to the lender.
                          •   In case of stock split, the position of the borrower would be proportionately
                              adjusted and the lender will receive the quantity of shares on the reverse leg
                              settlement date.



                                                                                                                   4
Early Recall and Repayment

Early Recall facility for the Lender

•    In case, the lender wants to recall the securities, he has a facility to place a
     “RECALL ORDER” on the order matching platform.

•    The lending fee for the balance period is at market determined rates hence the
     lender needs to quote the lending fee, he is willing to forego for the balance
     period.

•    The lender can only enter a ”RECALL” request, if he has existing reverse leg
     positions. The recall request can be made for a partial quantity of shares.


Early Repayment facility for the Borrower

•    In case, the borrower wants to repay the securities and further relend them, a
     facility to place a “REPAY ORDER” is provided on the order matching platform.

•    The lending fee for the balance period will be based on market determined rates,
     hence the borrower needs to quote the lending fee expected for the balance
     period.

•    Before the market places a REPAY order, the borrower has to first make an early
     repayment of securities in the repayment account prescribed by NSCCL.
                                                                                        5
Taxation

•   CDBT has issued a circular No 2/2008 dated 22nd Feb 2008, stating that lending
    and borrowing of securities under SLBS –2007 of SEBI will not be treated as
    “Transfer of securities” under Section 2(47) of Income Tax Act in the hands of
    the lender, so the capital gains will not be generated in the hands of the
    Assessee.*
•   Further, Securities Transaction Tax (STT) will not be payable on lending and
    borrowing transactions.
•   The lending fee will be treated as Business Income or Other income depending
    on the individual assessment of the investor.




                                                                                     6
Risk Factors

•   Once a security is lent under SLBS, until the reverse leg of the lending
    transaction in SLB Segment is completed, the said security will not be available
    either for selling in cash/capital market segment or for providing as
    margin/collaterals for the purpose of taking any exposure.
•   In the event the borrower fails to return the securities, NSCCL shall conduct a
    buy-in auction.
•   It is possible that in the event of a short delivery by any other market participant,
    the Lender client may get lesser number of shares than originally lent and may
    get cash in place of short delivery.
•   The buy-in auction shall be carried out in the Capital Market segment of NSEIL. If
    the security cannot be bought through the buy-in auction, the transaction shall be
    closed out. The methodology and rate of close out shall be intimated by NSCCL
    from time to time.




                                                                                            7
Indicative Return on SLBS trades

     Stock                                        Annualized Yield*
     Reliance Power                               5.0% - 6.0%
     Hero Honda                                   7.0% - 8.0%
     Hindustan Unilever                           5.0% - 6.0%
     Idea                                         5.5% - 6.5%
     Maruti Suzuki                                5.0% - 6.0%
     Tata Motors                                  4.0% - 5.5%
     Ambuja                                       3.5% - 4.0%
     ICICI Bank                                   3.0% - 3.5%
     SBI                                          5.5% - 6.0%


  * Net yield generated to client during July 2010 -March 2011, after costs.




** The above list is not complete and is just a sample from a longer list of stocks giving returns from lending
during the above period. Returns given are for indicative purpose only. The past performance may or
may not sustain in future.
*** The above annualised yield is based on assumption that the similar rate of return is available all
throughout the year, however in certain months there may not be any lending opportunity in one or all of the
above stocks. This would reduce the above mentioned annualised yields.
                                                                                                                  8
Disclaimer

This document and information contained in this document is solely for information purpose and may not be used or
considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial
instruments. This document is meant for private circulation only and the investment as mentioned and opinions expressed
in this document may not be suitable for all investors. In rendering this information, we assumed and relied upon, without
independent verification, the accuracy and completeness of all information that was publicly available to us. The information
has been obtained from the sources we believe to be reliable as to the accuracy or completeness. While every effort is
made to ensure the accuracy and completeness of information contained, the JM Financial Services and its affiliates takes
no guarantee and assumes no liability for any errors or omissions of the information. This information is given in good faith
and we make no representations or warranties, express or implied as to the accuracy or completeness of the information.
No one can use the information as the basis for any claim, demand or cause of action. Opinion expressed is our current
opinion as of the date appearing in this document only and are subject to change without any notice.
JM Financial Services and its affiliates shall not be liable for any direct or indirect losses or damage of any kind arising from
the use thereof. Affiliates of JM Financial Services may have issued other documents that are inconsistent with the
information/opinion provided in this document. JM Financial Services & affiliates may have used the information set forth
herein before publication and may have positions in, may from time to time purchase or sell or deal in its own account or on
behalf of the clients or may be materially interested in any of the securities/financial instruments mentioned or related
securities. Affiliate of JM Financial Services may from time to time perform investment banking or other related services for
any company mentioned herein.
Recipients of this document must make their own investment decisions, based on their own investment objectives, financial
positions and needs of specific recipient. The recipient should independently evaluate the investment risks and should
make such investigations, as it deems necessary to arrive at an independent evaluation of an investment in the securities of
companies referred to in this document and should consult their own advisors to determine the merits and risks of an
investment decision. This document should not be altered in any way, transmitted to, copied or distributed, in part or in
whole, to any other person or to the media or reproduced, duplicated or sold in any form.


    Mr. P. K. Choksi | Director & Compliance Officer
    Phone: +91-22-67303030 | email: prashant.choksi@jmfinancial.in

    JM Financial Services Pvt. Ltd.
    Corp: 3rd Floor ,Apeejay House , 3 Dinshaw Vachha Road , Churchgate , Mumbai – 400020
    Regd: 141, Maker Chambers III, Nariman Point Mumbai – 400021.
    NSE - Capital Market INB 231054835 | F&O Segment INF 231054835 | BSE - Cash Market INB 011054831
    F&O Segment INF 011054831 | Depository Participant – NSDL DP: IN-DP-NSDL-241-2004
    CDSL DP: IN-DP-CDSL-236-2004 | Portfolio Manager: INP 000000621                                                                 9

				
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posted:7/31/2012
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