Phillip Securities Securities Lending Programme.

[Thriftville]

Another good thing about Philips is that, they tend to commit for a longer period of time, providing more consistent return. Once they agree to borrow your shares, there's a higher chance that they will not return to you so quickly. SGX seems less willing to take risk. So they will return to you immediately once the shortist close the position.

If my shares are in demand by both companies, i would prefer to loan it to Philips. I'm speaking from my experience, the scenario might be different for different shares. Hope to hear your views.

I do not have experience with Philips lending program. Would it has higher counter-party risk with Philips vs SGX?

Probably time to think about Philips lending program, instead of staying with CDP since most of the holdings are long term

Yup that's a valid concern. Philips isn't a small fry, so I feel the risk is still ok (please do your own due diligence). Philips will demand collateral from the shortist, before he's allowed to borrow. Shortist needs to pay about 10% fees per annum.

Philips is more active at promoting share lending. You can login to their website and see what are the shares available to borrow. From there, you can gauge whether your shares is in demand. SGX seems to be serving bigger customers, and they're quite passive in this area.

[wsreader]

It is not just crappy stocks that will fall.
Maybe speculators want to play the cd/xd trick that kopicat and other skillful operators had been playing? As I learnt from kopicat (if I am have learnt well), the counters in play can be blue chips, but must be highly liquid.

[CityFarmer]

It is not just crappy stocks that will fall.
Maybe speculators want to play the cd/xd trick that kopicat and other skillful operators had been playing? As I learnt from kopicat (if I am have learnt well), the counters in play can be blue chips, but must be highly liquid.

To "play" the cd/xd trick with borrowing of share, with 10% annual interest? It is irrational to me.

I assume skillful operators like Kopikat (kopicat?) will not do so

[dzwm87]

What is this "cd/xd trick"? To capture price fall after ex-dividend?

With the 10% annual interest cost to short.. I don't think the risk-return ratio is attractive at all.

But I may be wrong - not too sure how this "cd/xd trick" works in totality.

[wsreader]

I am merely putting on my thinking cap to generate ideas on the use of SBL. In response to the comment that crappy business stocks are the ones that is short-worthy, I had suggested another possibility.

Lets look at sats for example. The closing price before xd was $2.83. It closed at $2.47 yesterday, which is 9 calendar days later. The price drop was 36 cents, more than the dps of 21 cents. I am not familiar with the cost involved for SBL, so not sure if it could be a profitable candidate for SBL. The 10% is annual interest, but the above short candidate only need 9 days.
I do agree that this example is trading upon hindsight, is irrational and I do not know how to determine the the risk-return before hand. Purely for discussion only.

[Thriftville]

The lending fee is negotiable. So if you're a regular customer, I believe you can get a much better rate.

[dzwm87]

Lets look at sats for example. The closing price before xd was $2.83. It closed at $2.47 yesterday, which is 9 calendar days later. The price drop was 36 cents, more than the dps of 21 cents. I am not familiar with the cost involved for SBL, so not sure if it could be a profitable candidate for SBL. The 10% is annual interest, but the above short candidate only need 9 days.
I do agree that this example is trading upon hindsight, is irrational and I do not know how to determine the the risk-return before hand. Purely for discussion only.

I see. From that, the short will be 12% gain against an estimated 0.2% borrowing cost (for 9 days).

But even neglecting the downside risk, there is still transaction risk. To capture that gain, I have to make sure I short right at the high before the market close and on the eve of ex-date. Then on the next day, I have to time the market and there is a level of uncertainty given that the stock price may rise (as evdient from HrGlass case or it may fall as suggested by SATS case).

Too much to time the market.. and too little margin of safety..

[pianist]

Another good thing about Philips is that, they tend to commit for a longer period of time, providing more consistent return. Once they agree to borrow your shares, there's a higher chance that they will not return to you so quickly. SGX seems less willing to take risk. So they will return to you immediately once the shortist close the position.

If my shares are in demand by both companies, i would prefer to loan it to Philips. I'm speaking from my experience, the scenario might be different for different shares. Hope to hear your views.

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I think your counters need to be quite active, then there's better chance to loan out. Try contacting other brokers to see if they need your shares. They might have clients who are interested to borrow.

does philips charge u anything for puting shares with them? for example, fee for crediting dividends which UOBKayHian Utrade account is charging after 1st year, quarterly fee or custodian fee?

all my counters are all 'dead' inactive counters, no wonder no one keen to borrow, dunno will there be more willing borrowers if i transfer them to philips?

[Thriftville]

does philips charge u anything for puting shares with them? for example, fee for crediting dividends which UOBKayHian Utrade account is charging after 1st year, quarterly fee or custodian fee?

all my counters are all 'dead' inactive counters, no wonder no one keen to borrow, dunno will there be more willing borrowers if i transfer them to philips?

It's FOC. The dividends will be credited to your Philips account, which you may later transfer to your own bank account.

Try checking with them whether they're interested at your counters. Then only you transfer the shares to them. I've loaned out inactive counter before. Guess its for hedging purpose.

[Phillip Securities]

We greatly appreciate your overwhelming responses and interest in the Securities Lending programme.

We are taking the chance to clarify and address some doubts in this subject matter.

The differences between the lending programme in CDP and Phillip SBL (provided by Phillip Securities Pte Ltd) are shown below:

Lending Shares to Phillip SBL
1) Participants can lend any amount of shares, in standard lot size
2) Lending rates vary from 0.25% to 5% p.a., depending on the prevailing market rate of the counter involved.
3) Shares lent out to PSPL can only be sold using Phillip Securities’ platform.

Lending Shares to CDP
1) Participants have to lend at least 50,000 shares or S$50,000 in value
2) Current lending rate is at 4% p.a. for all counters.
3) Shares lent to CDP can be sold at any broking house which you hold an account with.

Borrowers of Phillip SBL include both institutions and retail. As such, the rates charged by Phillip SBL have to be in line with market rates to remain competitive. We seek our lenders’ understanding to give us the flexibility to determine the lending rates, so as to encourage demand for borrowing from Phillip SBL.

Currently, the borrowing rates for CDP are fixed at 6% p.a. for all counters.

The risk involved in Securities Lending is counterparty risks. However, this risk is mitigated as our lenders only need to look at Phillip Securities, a reputable financial institution over the past 37 years, as the borrower. To provide further security to lenders, borrowers are required to put up a collateral (or guarantee) which is usually fixed at an agreed percentage over the mark-to-market value of the loan. Borrowers are also obliged to return the shares either on demand or at the end of the loan term.

Where corporate actions (such as dividends, bonus securities and rights issues) are concerned, borrowers are obligated to make equivalent payments to lenders for the economic benefits for holding onto the securities. As such, lenders are entitled to all corporate actions declared by the company, with the exception of voting rights, where prior notice has to be given.

In the short-term, lending of a security may create a downward pressure on its share price due to the short selling activity. This happens when investors hold a bearish view of the security and would like to sell first and buy back later at a lower price. Other reasons for securities borrowing also include hedging, arbitraging or market-making purposes. However, what is sold must ultimately be bought back. As such, securities lending will not really aid in depressing share prices in the long run. In fact, securities lending adds liquidity and reduces volatility to the security concerned through the process of price discovery and transparency; hence, creating an efficient market. Lastly, it also aids in the efficiency of trade settlement.

We hope that the above information had given further insights into Securities Borrowing and Lending. You can call us at 6531 5454 or email [email protected] should you have further queries.

Thank you.