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Securities Lending and Borrowing Service

Securities lending and borrowing (SLB) refers to transactions in which an institution holding securities for the long term lends the securities to another party in exchange for a fee. Borrowers are institutions that need securities, either to avoid settlement failure, or for their investment strategies.

Market participants and eligible securities

  • Lenders

    Lenders lend securities they own in exchange for a fee. Major lenders are pension funds, asset management companies, banks, insurance companies, and securities companies.

  • Borrowers

    Borrowers seek to earn returns by using the borrowed securities. Major borrowers are securities companies, hedge funds, and asset management companies.

  • Intermediaries

    Intermediaries handle the intermediation, arrangement and execution of SLB transactions; delivery and return of loan securities; collateral management related to SLB transactions; and management of rights arising from loaned securities. Major intermediaries are KSD, investment brokerage companies, and Korea Securities Finance Corporation (KSFC).

  • SLB-eligible securities

    SLB-eligible securities include listed stocks, listed bonds, exchange-traded fund (ETF), and Korea depository receipts (KDR).

Service procedures

  • Execution of SLB transaction

    Borrowers and lenders apply for transactions by entering the name and quantity of a security, and the fee rate into the SAFE+ system. When the transaction details from the borrower and the lender are matched, the transaction is executed. The delivery of loan securities and collateral should be made simultaneously.

  • Submission of collateral

    A borrower is required to submit collateral to KSD or lender. Once the submission is confirmed, the loan securities will be transferred from the borrower's account to the lender's account in the participant account book.

  • Return

    At maturity, securities on loan must be returned in the same kind and quantity. The borrower can return the loaned securities at any time during the loan term.

Benefits of the SLB service

  • Competitive edge as first provider of SLB services in Korean market

    KSD has an extensive network of borrowers and lenders that enabled the smooth facilitation of SLB transactions.

  • Risk elimination though a robust risk management system

    KSD manages risk through mark-to-market, margin calls, and evaluation of participants' credit ratings, while guaranteeing the safety of transactions.

  • Professional rights management services as a CSD

    KSD provides accurate management of rights arising from loaned securities, as a CSD with centralized issuers' information.