Lenders are only eligible for all corporate benefits as they remain the owners of shares lent through SLBM.
Let's see how this is managed in case of different corporate actions, such as: - Dividend and stock split: The contract shall continue to trade till the respective expiry and there will be no foreclosure. The borrower would pay the dividend received on the record date +1 to the Exchange, and the Exchange would pass it on to the lender of the securities. In case of a stock split, the lender receives the revised quantity on the expiry day.
- Right issue, bonus and buyback: The contract will be foreclosed on the ex-date and the shares will be credited back to the lender. This early foreclosure ensures the lender receives the shares in their Demat account before the record date, making them eligible to participate in the corporate action such as a rights issue or buyback. The lending fees for the balance period shall be collected from the lenders and shall be passed on to the borrowers. To know more, see How will the lending fees be adjusted in case of the foreclosure of the SLB contract?
RELATED FACTS: However, in the case of foreclosure where the corporate action is announced upfront by NSE Clearing before the transaction has been executed, there will be no adjustment of the lending fee. Market participants shall accordingly quote a lending fee for the shorter transaction cycle. |