Bursa Malaysia: Securities borrowing & lending

Bursa Malaysia: Securities Borrowing & Lending Model Enhanced For More Flexibility

04/08/09

The Securities Commission Malaysia (SC) and Bursa Malaysia today announced the introduction of Securities Borrowing and Lending Negotiated Transaction (SBLNT), an enhanced securities borrowing and lending (SBL) model that offers an option to borrow and lend on an over-the-counter (OTC) basis. The SC also released the revised SBL Guidelines while Bursa Malaysia issued the relevant rules, procedures and guidelines to provide for SBLNT.

The SBLNT model will be implemented on 17 August 2009 and relevant participants will be able to submit applications with immediate effect.

Under the SBLNT framework, any eligible person who is approved by Bursa Malaysia Securities Clearing Sdn Bhd (Bursa Malaysia Securities Clearing) may borrow and lend securities. The lender and borrower are now given the flexibility to enter into SBL agreements, hence they can negotiate and agree on the terms of borrowing and lending directly. These SBL transactions must, however, be reported via on-shore borrowing and lending representatives and facilitated through Bursa Malaysia Securities Clearing as the approved clearing house.

This reporting is imperative for the movement of the loaned securities to take effect from the lender’s depository account to the borrower’s depository account. In addition, only securities that are specified by the approved clearing house are eligible for borrowing and lending transactions and the purposes for which the borrowing and lending have also been specified. The SBLNT framework also enables Bursa Malaysia Securities Clearing to ensure orderly and transparent borrowing and lending.

The SBLNT model will complement the existing SBL Central Lending Agency (SBL CLA) model which was introduced in January 2007 as the first phase of the securities borrowing and lending framework. In the SBL CLA model, Bursa Malaysia Securities Clearing acts as the central lending agency for all SBL activities conducted in Malaysia and participants need to comply with the terms and conditions as directed by Bursa Malaysia Securities Clearing. Both the current SBL CLA and the new SBLNT models will operate concurrently.

The revised SBL Guidelines by SC also provide clarification on the tax treatment applicable to SBLNT. In order to qualify for tax exemption as provided in the Income Tax (Exemption) (No.30) Order 1995, the agreements between the borrowers and lenders will be deemed approved  SBL agreements if the SBL agreements contain the minimum terms and conditions as prescribed in Bursa Malaysia Securities Clearing’s rules.

The revised SBL Guidelines and rules, which will take effect from 17 August 2009, are now available on the SC website at www.sc.com.my as well as Bursa Malaysia website at www.bursamalaysia.com.