Securities lending is the market practice of temporarily transferring securities, for a fee, from their holder (the lender) to another party (the borrower), with the borrower agreeing to return the securities to the lender either on-demand or at the end of the agreed loan term.
This practice usually requires the borrower to collateralise the transaction with cash or other securities of a value equal to or greater than that of the lent securities, in order to protect the lender against counterparty credit risk.
The Nigerian Stock Exchange’s Securities Lending and borrowing report is prepared on a weekly basis, with data collected from the market’s Securities Lending Agents.
The historical securities lending and borrowing transaction report shows that as at January 18, 2019 135 units of Lafarge Africa were lent. Others securities lent and their dates are: 100 units of Africa Prudential, FCMB (100 units), and Fidelity Bank (100 units).
They were lent on January 18, 2019. On November 12, 2019, 1,000 units of FBN Holdings were lent; on September 27, 2019, 10,000 units of Access Bank were also lent, while on October 28, 2019, 50,000 units of FBN Holdings were lent.
Securities lending plays an important role in capital markets by providing liquidity, which in turn reduces the cost of trading and promotes price discovery. Global Master Securities Lending Agreement (GMSLA) and its Nigerian Addendum is the standard contract document that binds lender and borrower in a Securities Lending arrangement.
Iheanyi Nwachukwu
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