Securities Borrowing is a facility that is used by investors to borrow securities in order to engage in covered short selling, for arbitrage, hedging or trading views. This facility has generally been available only to institutional investors, enabling them to participate in both the upside and downside of the market or trade alternative investment strategies.

For the average investor who wishes to participate in short selling currently, he would have to close his position on the same day or be subject to buying in by the SGX if he does not have shares for delivery on settlement date of the sale.

By providing this facility to our retail customers, OCBC Securities intends to level the playing field for the individual investor.

You can borrow any shares that OCBC Securities has available for lending. For the list of securities available for borrowing, please check with your Trading Representative. 

You can put up either cash or acceptable securities as collateral. OCBC Securities will stipulate the list of acceptable securities. Any proceeds from the short sale of the borrowed shares will also be held by OCBC Securities as collateral for your borrowed shares.

You can start trading after you have put up the required collateral with us. If the collateral is in the form of acceptable securities, you have to wait until these are transferred to OCBC Securities. This normally takes about 2 to 3 days.

Before you can engage in any covered short selling, you must have confirmation of the borrowing of the shares from OCBC Securities through your Trading Representative. For SBL Internet clients, you can proceed to borrow shares up to the value of the borrowing limit reflected in your internet a/c.

If you place a collateral amount of $5,000, the computation of the value of shares that you can borrow are:

From the above table, we can see that the available value for Borrowing is always 2 times the value of collateral pledge, and the initial limit maintained is always 150%.

Limit % =  Total Market Value of Collateral (i.e cash/securities) X 100                                                                                                           

                         Market Value of Shares Borrowed

Limit % = $5000 (cash) + $10,000 (value of borrowed stock not sold)  X 100
                                                     $10,000 

                 =150%    

* Note : See Point 23 for a number of scenarios on maintenance of limit

In fact, you will have to secure the confirmation of borrowed shares before you can engage in a short sale. As long as you observe the maintenance limit of 150%, you can sell and buy-back as many times as you like. OCBC Securities is under no obligation to settle the short sales without the borrowing of shares. Those trades will be subject to buy-in by the SGX.

If the market value of the borrowed shares which have been short sold rises, resulting in your limit % falling below 140%, your Trading Representative will inform you and request that you deposit additional collateral within 2 days to bring the limit % up to 150%.

(Note : top-ups will be required to restore the limit back to the level of 150%) 

Example: 

Initial Collateral value is $100,000
Add the realized sales proceeds from the borrowed stock eg. $200,000
Current Market Value of Borrowed Shares is $220,000

Limit % = $100,000 + $200,000 * 100
                    $220,000 

             = 136%

Therefore, the additional collateral to top up is $30,000 to bring the limit back to 150%.

If the fall in the portfolio of shares (including collateral) results in your limit % falling below 130%, we will have to buy-in the borrowed shares and return to OCBC Securities immediately to bring the limit % to at least 150 % (See Point 23 – Scenario 4).

According to the Terms of the SBL account, if your limit level is greater than 130% but lower than 140%, your account would be subject to limit call. To meet your limit call, you can either deposit additional cash, acceptable securities or buy back your borrowed shares and return them to meet any limit call. You have two days to comply with the limit call.

If your limit falls below 130%, it is mandatory in the Terms of the SBL account that part or all of the shares borrowed may be forced buy-back by the company to bring your limit to at least 150%. Also, your collateral (if it is not cash) may be forced sold to meet limit requirement.     

There is no limit to the number of counters that you can borrow as long as you can observe the maintenance limit of 150%.

Yes, you will be able to borrow up to 2 times the value of the additional limit or collateral.

You cannot withdraw the borrowed shares. The borrowed shares can only be sold and bought back using your SBL account with OCBC Securities.

You can withdraw the cash and securities that are pledged as collateral provided that the maintenance limit of 150% is observed.

Example:                                                                                                                   

Pledged Shares Collateral value is $100,000

Add the realized sales proceeds that you get when you sell the borrowed stock eg. $200,000

Current Market Value of Borrowed Shares is $150,000             

Limit % = $100,000 + $200,000  X 100
                       $150,000 

            = 200%
    

Therefore, the collateral value that can be withdrawn is $75,000 to maintain the limit above 150%. 

However, if the market value of the borrowed shares rises, you may be required to do a top up. (see point 8)

Yes. But only up to the extra cash collateral amount and the shares bought will be added as collateral in the SBL account. For the calculation of the extra cash collateral amount, please refer to point 12.

Yes. You can sell your pledged securities but the sales proceed received will be added as collateral into your securities borrowing account. For withdrawal, please refer to point 13.

The borrowing fee charges are as follows :

10% per annum of the Market Value of the Borrowed Stock ie. about 0.192% per week
(the market value will be marked daily based on the previous closing price)

The fees is subjected to G.S.T.

Example:

Assuming that the Market Value of the Borrowed Stock is constant throughout the borrowing period

Therefore, the borrowing fees of a $10,000 stock for 7 days (10% X 10,000 X 7/365) is about $19.18 (excluding G.S.T)

The fees will be deducted monthly from the cash balances in your SBL account and you will receive monthly statements

There is no limit on the period of borrow but OCBC Securities has the right to recall the borrowed shares.

You can return the borrowed shares any time by notifying your Trading Representative. For SBL Internet clients, you can return the shares by going to the Outstanding Borrowing page and click on the "return" button beside the share that you wished to return.

The borrowing fee will be calculated until the day when OCBC Securities has received the borrowed shares. That is the 3rd market day after the buy-back of the borrowed shares or the current day if the shares are already in your SBL a/c.

Also, you are not allowed to borrow over a period which extends over any relevant record date/period including dividend and/or accrual and accretion entitlement and/or book closure date of securities/stock borrowed (unless allowed by OCBC Securities and subject to additional Terms & Conditions).

SBL Department will recall the borrowed shares through your Trading Representative or through e-mail at a period before the ex-date of the above-mentioned corporate actions. New loans will not be allowed until after the record/book closure date of the above-mentioned corporate actions.

Yes, we will pay interest on cash balances held in the SBL account at an interest rate fixed at the beginning of each month.

You will be charged interest on any negative balances which could result from:

i. monthly SBL fees debited,
ii. buy back of the borrowed shares at a higher price,
iii. forced buy-back by the company and 
iv. any other circumstances that results in a negative balance.

The negative balance will be charged at an interest rate of 2 % above OCBC Prime rate.

You are required to settle all negative balances immediately upon receipt of the monthly statements.

Yes, you will receive monthly statements showing your borrowed share transactions and the fees charged.

No. Shares cannot be borrowed or loaned when there is no effective title transfer. Short selling of this type of shares may lead to subsequent buying in by SGX when securities are traded on a “ready basis”.

A list of CDP charges, handling charges and other charges is appended below for your information.

*All fees are subject to GST.

Note: All the charges are subject to change without prior notice.

Mr Tan opened an SBL account with OCBC Securities by pledging S$10,000 cash and S$20,000 worth of securities as collateral. By doing so, he is able to borrow shares of value up to S$60,000. He subsequently borrowed stock of value S$60,000.

Scenario 1:

Mr Tan did not sell the borrowed stock, but the pledge shares value fall to S$13,000. The limit calculation is as follows,

Limit % = Total Market Value of Collateral (i.e cash/securities) X 100
                     Market Value of Shares Borrowed

Limit %  = $10,000(cash)+$13,000(securities)+$60,000(value of borrowed stock not sold) X 100 
                                                                          $60,000

               = 138%

So, Mr Tan will receive a limit call to top up collateral of S$7,000 to bring the limit back to 150%. He has two market days to fulfill the limit call.


Scenario 2:

Mr Tan sold the borrowed stock and the sale proceeds is added as collateral, but the market value of the borrowed stock falls to
S$50,000. The rest stay constant. The limit calculation is as follow,

Limit % = Total Market Value of Collateral (i.e cash/securities) X 100
                          Market Value of Shares Borrowed

Limit %  = $10,000(cash) + $20,000(securities) + $60,000(realized cash from short sale) X 100 
                                                             $50,000

              = 180%

Three options available to Mr Tan :
i. he can withdraw collateral value worth S$15,000 out of his initial collateral value of $30,000, OR 
ii. he can borrow shares worth $30,000, OR
iii. he can buy back the borrowed shares and return to OSPL. He would have earned a profit of (S$60,000- S$50,000) = S$10,000 excluding transaction costs.


Scenario 3:

Mr Tan sold the borrowed stock and the realized sale proceeds is added as collateral, but the market value of the borrowed stock rises to S$70,000. The rest stay constant. The limit calculation is as follow,

Limit % = Total Market Value of Collateral (i.e cash/securities) X 100
                         Market Value of Shares Borrowed

Limit %  = $10,000(cash) + $20,000(securities) + $60,000(realized cash from short sale) X 100 
                                                               $70,000

              = 129%

So, Mr Tan will receive a limit call to top up collateral of S$15,000 to bring the limit back to 150%. He has to do it within the day if not OCBC Securities has the right to buy back part or all the borrowed shares and return to OCBC Securities so as to bring the limit back to 150%.


Scenario 4:

Based on Scenario 3, Mr Tan can also buy back part of the borrowed shares and return to OCBC Securities so as to bring the limit back to 150%. So, for example he bought back S$30,000 of the borrowed stock. Assuming the rest stay constant, the limit calculation is as follows,

Limit % = Total Market Value of Collateral (i.e cash/securities)  X 100
                            Market Value of Shares Borrowed

Limit % = $10,000(cash)+$20,000(securities)+$30,000(realized cash from short sale) X 100 
                                                           $40,000

             = 150%

In this case, Mr Tan will suffer a loss of S$10,000 excluding all other costs when he close his entire short sale position at the current price.