The Hindu Business Line : BSE ties up with Bank of India for short-selling

Mr T.S. Narayanasami, (left) Chairman & Managing Director, Bank of India, and Mr Rajnikant Patel, Managing Director & CEO, BSE, at a press conference the launch ’Bank of India Shareholding Web-Site’ in Mumbai on Wednesday. —

Our Bureau

Mumbai, April 16

To facilitate short selling of securities by retail and institutional investors, the Bombay Stock Exchange (BSE) on Wednesday signed an agreement with its clearing house — Bank of India Shareholding Ltd (BOISL).

The agreement aims to facilitate the Securities Lending and Borrowing Scheme (SLBS), which starts from April 21.

Settlement services

BOISL is the authorised intermediary in SLBS on behalf of the BSE, as approved by the capital market regulator SEBI.

Bank of India holds 51 per cent stake in BOISL, which is also known as the BSE Clearing House; the remaining 49 per cent is held by the BSE. The company provides clearing and settlement services to members of the exchange. Initially, the securities traded in F&O segment shall be eligible for lending and borrowing under SLBS.

“The transactions under SLBS shall be settled on a T+1 day basis as per time lines specified by BOISL. In the first leg pay-in, shares not delivered by the lender will be closed out. The borrower will have to return the shares borrowed on the T+8 day to the lender. If he fails to deliver, the shares will go for auction. The auction pay-in will be held on the T+9 day. The shares not received in auction will be closed-out,” said the official BOISL Web site, which was launched on Wednesday by the BOI Chairman and Managing Director, Mr T.S. Narayanasami.

Settlement obligations

“The clearing members will have to submit collateral deposits towards base minimum capital and additional capital. All margins shall be computed and collected as per the present system followed in the cash segment (equity market),” said the Web site.

“A separate trading screen will be provided for lending and borrowing of the securities. The settlement obligations for transactions under SLBS will be on gross basis. The lender will be eligible for lending fees, which will be decided by the market.”

“So far, 25 members have registered with BOISL for SLBS,” said Mr A.C. Gautam, CMD, BOISL, during the launch function of SLBS at the BSE.

The BSE officials said they had conducted mock trading sessions to test short selling on real time basis. BOISL is technically ready for a T+1 settlement cycle, which, if allowed, will bring Indian bourses ahead of even the US bourses, which still follow a T+3 settlement cycle. Currently, Indian exchanges follow the T+2 settlement cycle for securities transactions that was introduced in 2003. “We are fully prepared for T+1 or even T+0, whenever required,” Mr Gautam said.

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