SEBI allows extended roll-over of securities lending and borrowing, liquid index ETFs

The Securities and Exchange Board of India (SEBI) has revised the securities lending and borrowing (SLB) framework to allow any existing lender or borrower to extend an existing lent or borrow position.

Accordingly, a lender who is due to receive securities at the end of the pay-out may be permitted to extend the period of lending. Similarly, a borrower who has to return borrowed securities in the pay-in of an SLB session, may, through the same SLB session, extend the period of borrowing.

However, the roll-over should be conducted as part of the SLB session and no netting of counter positions, ie netting between the 'borrowed' and 'lent' positions of a client, will be allowed, SEBI said in a circular.

Roll-over will be available for a period of 3 months, ie, the original contract plus 2 rollover contracts.

SEBI also allowed the introduction of liquid index exchange traded funds (ETFs) under the SLB scheme. Such ETFs would be eligible for trading in the SLB segment.

An index ETF will be deemed 'liquid' provided the index ETF has traded on at least 80 per cent of the days over the past 6 months and its impact cost over the past 6 months is less than or equal to 1 per cent.

Positions limits for SLB in respect of ETFs will be based on the assets under management of the respective ETF.

SEBI has advised stock exchanges and depositories to take necessary steps and put in place necessary systems for implementation of liquid index exchange traded funds.