Securities lending is a temporary lending of securities by a lender to the borrower.
SLB is a very popular mechanism globally. This mechanism provides liquidity to the
equity market and there by increases the market efficiency.
In India, SLB is an Exchange traded product. NSE offers an anonymous trading platform
and gives the players the advantage of settlement guarantee. It provides the lender
and the borrower a secured platform to transact without the worries of counter party
In most other countries this product is an OTC (over the counter) product whereby
the custodians facilitates the transaction of borrow and lend among institutions.
It is a negotiated transaction between two parties in most countries. Thus, the
lender has to deal with counter party risk, collateral adequacy, sufficiency risk,
and other related risks.