Earn More than FD rates via Stock Renting - SLBM !!

SLBM Stock Lending And Borrowing Mechanism, lending and borrowing of stocks that are idle and aren't currently using for transactions or daily trading. It is one of the best way to earn extra income with such stocks. There are two parties involved in SLBM concept, one is ledger who have the stocks in the portfolio and borrower who buys the stocks from lender for a short span of time. The best part of the this investment type is it is completely monitored through governing body SEBI. SEBI has allowed all investors types like retailers and institutional to borrow as well as lend securities.

How the concept work, it follows a market practice where once borrower buys (short term) securities from lender, the same securities get transferred temporarily through an approved intermediary for a nominal commission or fee. The borrower is liable to return the securities bought from lender when lender demands it back or at the end of the period (as per the agreement). Also borrower can return the securities early too. The settlement cycle is basis normal market timing. 

How the process gets started?

There are certain benefits to both the parties - Seller & Borrower

Here's how the process typically works:

1. Lender: The lender is usually an institutional investor such as a mutual fund, pension fund, insurance company, or individual investor who owns securities and is willing to lend them out for a fee to earn additional income on their holdings.
2. Borrower: The borrower is typically a financial institution such as a broker-dealer, hedge fund, or another investor who needs to borrow securities for various purposes, such as covering short sales, arbitrage opportunities, or meeting delivery obligations.
3. Terms: The terms of the securities lending agreement include details such as the type and quantity of securities being lent, the duration of the loan, the fee or interest rate charged for borrowing the securities, and the type and amount of collateral required to secure the loan.
4. Collateral: The borrower is required to provide collateral to the lender to mitigate the risk of default. The collateral is usually in the form of cash, government securities, or other high-quality liquid assets with a value equal to or greater than the value of the borrowed securities.
5. Fee: The borrower pays a fee to the lender for borrowing the securities. The fee can be fixed or variable and is typically based on factors such as the demand for the securities, the liquidity of the market, and the creditworthiness of the borrower.
6. Benefits: Securities lending can benefit both parties involved. The lender earns additional income on their securities holdings through lending fees, while the borrower gains access to the securities they need for various trading strategies or operational purposes.
7. Risks: Although securities lending can be a profitable activity, it also involves risks. The main risks include counterparty risk (the risk that the borrower may default), market risk (fluctuations in the value of the securities), and operational risk (errors or delays in the settlement process).

Overall, securities lending and borrowing is a common practice in the financial markets that allows investors to optimize their returns, facilitate short selling, and improve market liquidity. It is important for both lenders and borrowers to carefully evaluate the terms of the agreement and manage risks effectively to ensure a successful outcome.

Why to choose SLB-

1. Increased profits and bonus to lender-You can earn lending fee on your existing holdings. Also, Dividends/Bonus are transferred to Lender.

2. Increased liquidity for trader-If you’re borrowing securities, you’ll have increased liquidity, and can protect other investments and portfolio, especially during a downturn.

3. Reduced tax liability- Lending does not incur short term capital gain tax.