Stocks
Why open a Lending and Borrowing Securities account with Us?
Gain investment opportunities for covered short selling,
arbitraging or hedging. You can lend or borrow securities to
take advantage of prevailing market conditions, for example earn
potential profits in a bear market by borrowing shares to short
sell.
We offer a flexible quantum of borrowing; up to 2 times the
collateral pledged, subject to our discretion. We have a wide
range of securities for borrowing and we accept a wide range of
securities (including cash) as collateral. Borrowing periods are
negotiable and we do not charge maintenance fees on your
Securities Borrowing and Lending account.
How it Works
Covered Short Selling
Assume you think that company ABC has a poor outlook in the coming months. Right now the stock is trading at SGD25, but you see it trading much lower than this price in the future. You decide to short sell this stock:
| Day 1: Borrowed and short sold 1,000 shares of stock ABC at SGD25 |
SGD25,000 |
| Day 30: Bought and returned 1,000 shares of stock ABC at SGD20. |
SGD20,000 |
| Your Gross Profit* | SGD5,000 |
* Excluding brokerage/commission, clearing fees, SGX trading fees, borrowing costs, and relevant GST.
Arbitrage
Benefit from market inefficiencies arising from product mispricing. E.g. buy a long futures contract on a security and short sell the underlying security.
Hedging
Investors who are expecting to receive shares, options, rights, bonuses etc in due time can borrow the shares first, prior to receiving them, and sell them in the market to lock in the price that they want, and, upon receipt of the shares, return them to the lender.
Risks of Securities Lending and Borrowing
Investors should consider the following risks which are applicable to Securities Lending and Borrowing:
Recall Risk
Shares could be recalled by the lender at short notice.
Shares may also be recalled due to corporate actions, or the
investor may need to compensate the lender for the corporate
actions involved.
Unlimited Upside Risk
Short selling can be risky because there is no guarantee
that the price of a shorted share will drop. If the price
rises, the investor would still have to cover the short sale
and pay the higher market price, which could be
substantially higher than the price at which the share was
originally short sold.
Over-exposure and Over-trading
Investors may tend to look only at the margin required and
often fail to appreciate and take the full contract value
into account. When investors trade in a large number of
contracts, the total potential exposure of such contracts
may be significantly beyond their financial resources.
Margin Call
If an investor is unable to put in the additional funds for
a margin call, the broker may close out the position without
prior notice to you. Furthermore, the investor will still be
liable for any further losses that may have resulted from
the position being closed.
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FAQs
What are some of the benefits and features of Securities Lending and Borrowing?
Flexible Quantum of Borrowing
Borrow up to 2 times the collateral pledged, subject to our discretion.
Wide Range of Securities Accepted as Collateral
Cash and shares (subject to our discretion) listed on the Singapore Exchange are acceptable as collateral. A minimum collateral of SGD10,000 in cash and/or acceptable shares is required.
Wide Range of Securities Available for Borrowing
We have a wide range of securities available for borrowing.
Negotiable Borrowing Periods
Borrowing periods are negotiable, and start from a minimum of 4 market days.
No Maintenance Fees
We do not charge maintenance fees in relation to your Securities Borrowing and Lending account.
Borrow up to 2 times the collateral pledged, subject to our discretion.
Wide Range of Securities Accepted as Collateral
Cash and shares (subject to our discretion) listed on the Singapore Exchange are acceptable as collateral. A minimum collateral of SGD10,000 in cash and/or acceptable shares is required.
Wide Range of Securities Available for Borrowing
We have a wide range of securities available for borrowing.
Negotiable Borrowing Periods
Borrowing periods are negotiable, and start from a minimum of 4 market days.
No Maintenance Fees
We do not charge maintenance fees in relation to your Securities Borrowing and Lending account.
How does margin call work for Securities Lending and Borrowing?
What is the Minimum Maintenance Ratio?
The Minimum Maintenance Ratio is at least 140%.
What Happens when Maintenance Ratio ˂ 140%?
A limit call will be triggered. You will be advised to deposit additional cash, marginable securities or buy back the borrowed securities and return them so as to bring the Maintenance Ratio up to or above 150% within 3 business days.
What Happens when Maintenance Ratio ˂ 130%?
A forced buy-in call will be triggered. You will have to top up immediately, failing which we reserve the right to force sell your pledged securities or institute forced buy-in of the sold borrowed securities to bring the Maintenance Ratio up to or above 150% within the same day.
The Minimum Maintenance Ratio is at least 140%.
What Happens when Maintenance Ratio ˂ 140%?
A limit call will be triggered. You will be advised to deposit additional cash, marginable securities or buy back the borrowed securities and return them so as to bring the Maintenance Ratio up to or above 150% within 3 business days.
What Happens when Maintenance Ratio ˂ 130%?
A forced buy-in call will be triggered. You will have to top up immediately, failing which we reserve the right to force sell your pledged securities or institute forced buy-in of the sold borrowed securities to bring the Maintenance Ratio up to or above 150% within the same day.
