Kenya Closes in on Securities Lending Platform

The Central Depository and Securities Corporation (CDSC) has completed its lending platform testing, bringing the aim to start securities lending and borrowing at the National Securities Exchange (NSE) one step closer to reality.

Security Lending and Borrowing is the temporary transfer of shares from one party to another at an agreed lending/borrowing charge, with a formal agreement to return the securities either on-demand or at a future pre-arranged date (SLB).

The CDSC is testing the platform on the Regulatory Sandbox run by the Capital Markets Authority (CMA), as well as developing rules to guide the process once it is up and running.

The CDSC, as the central counterparty, will guarantee the settlement of all lending and borrowing transactions. “CDSC has successfully tested screen-based SLB and is ready to exit the Sandbox,” the CMA stated.

The company has since submitted guidelines for the platform’s functioning, which are currently being reviewed by the Authority.

The CDC’s screen-based platform, according to the CMA, will recognize the lender contact as an SLB agent and issue securities to the agent to borrow or lend on their behalf. The data will then be uploaded to the CDSC system, giving borrowers and lenders access to a single platform where they may lend and borrow, making the transaction process easier.

Institutional investors, such as pension funds that invest a major portion of their portfolio in equities, and individual investors with long-term strategies, will benefit the most from the trade.

The revenues received from lending the idle securities can be used to cover costs associated with portfolio maintenance, such as custody fees.