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Automatic securities lending is a tool which prevents the halting of settlement of transactions in organised trading.

A securities loan is an agreement whereby the lender transfers to the borrower the title to a specific quantity of securities marked with a specific code and the borrower agrees to transfer the title to the same quantity of securities marked with the same code back on the date set in the agreement and to provide the adequate collateral and to pay a fee in the amount set out in the Table of Fees.






The terms of concluding automatic securities loans:

  1. Collateral
    • The terms of calculating the required collateral are set by the Management Board of KDPW taking into account the value of borrowed securities (§ 83 of the Detailed Rules of Operation of KDPW).
    • The value of collateral may not be lower than the value of borrowed securities.
    • The value of securities which constitute collateral is the market value of the securities subject to a haircut.
    • Collateral in cash is deposited in the bank account of KDPW while securities which constitute collateral of an automatic loan are blocked in the relevant account maintained for the borrower in KDPW.
  2. Satisfying the lender’s credits from collateral:
    • KDPW provides the lender with the collateral immediately upon the occurrence of any of the three types of the borrower’s default, i.e.:
      • the loan is not returned when due; or,
      • the collateral is not adjusted to the required level; or
      • the collateral is not provided in the required form.
      This means that cash is transferred to the cash account of the participant and securities are transferred to the relevant account maintained for the borrower in KDPW. 
      New: Under the previously applicable regulations, upon default, collateral was taken over by KDPW_CCP and used to purchase loaned securities and to return them to the lender. The change implies that KDPW provides the collateral directly to the lender. As a result, KDPW no longer charges a fee for initiating the procedure of closing the loan in case of borrower default. 
    • Returning borrowed securities
      • Borrowed securities should be returned within 5 days of the date of the contract. The borrower may return the borrowed securities earlier.
        New: The return date of borrowed securities is set in the KDPW Rules.
      • The borrower may not refuse to accept partial return of loaned securities.
        New: It is now possible for the borrower to return borrowed securities in part. As a result, the borrower may return the borrowed securities in whole or in part by means of one or more instructions sent within the lifetime of the loan. If the quantity of returned securities is greater than the volume of the loan, the instruction will be rejected.
      • Partial return of a loan does not extend the term of the loan; hence, the final part should be returned at the last settlement session on the fifth day of the loan at the latest. 
    • Identification of parties to a loan

      KDPW allows parties to a loan contract to identify themselves.

      New: Under the previously applicable regulations, the parties to a loan remained mutually anonymous. This rule no longer applies: after settlement of a loan contract, the borrower’s details are sent to the lender in order to monitor the risks of the borrower; likewise, the borrower receives the lender’s details.

         

        The terms and conditions of automatic securities lending are set out in detail in the KDPW Rules (Chapter IVa Securities lending) and in the Detailed Rules of Operation of KDPW.

        Last modified:20-05-2015 Go up