The plan to launch securities lending and borrowing at the Nairobi Securities Exchange (NSE) #ticker:NSE has moved a step closer after the Central Depository and Securities Corporation (CDSC) successfully completed testing the lending platform.
The CDSC has been testing the platform on the Regulatory Sandbox run by Capital Markets Authority (CMA), and at the same time has been developing rules to guide the process once it goes live.
Securities Lending and Borrowing (SLB) is the temporary transfer of shares from one party (the lender) to another (the borrower) at an agreed lending/borrowing fee, with a formal agreement to return the securities either on-demand or at a future pre-agreed date.
The CDSC is the central counterparty that will guarantee the settlement of all lending and borrowing transactions.
“CDSC has successfully tested screen-based SLB and is ready to exit the Sandbox. The corporation has since submitted rules pertaining to the operation of the platform that are currently under review by the Authority,” said the CMA.
The CMA said that the CDSC’s screen-based platform will see the lender contact an SLB agent and issue securities to the agent to either lend or borrow on their behalf. Biggest beneficiaries
The agent then places the information on the CDSC system allowing borrowers and lenders to have a central platform where they can borrow and lend for ease of transactions.
The trading is expected to benefit institutional investors like pension funds that hold a significant part of their portfolio in equities and individual investors with long-term investment strategies.
They can earn fees from lending their idle securities, and utilise the proceeds to offset costs associated with maintaining their portfolio, like custody fees.
cmwaniki@ke.nationmedia.com