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Monday, October 8, 2012

Citibank India opens new counter for securities lending

Citibank India has come up with a new service that will allow its domestic and offshore clients to get seamless access to the Indian securities lending and borrowing market.

From being a custodian of securities, Citibank India has now assumed a market participant’s role. This is expected to impart the much-needed liquidity for it to take off. Simply put, FIIs and domestic institutional clients can do securities lending and borrowing through Citi’s new solution called ‘OpenLend’.

Different structures

Securities lending and borrowing (SLB) in India is an exchange traded model — trades are executed via order-matching platforms set up by the clearing corporations of exchanges. Currently, FII participation in this market is ‘next to zero’. While securities lending is largely an over-the-counter (OTC) activity in most countries, in India, it is done through an anonymous, exchange-traded central counterparty model.

Thus, it took international players unusually long to adapt to the Indian system. SEBI had, in 2010, made several changes to the SLB system in India, paving the way for some revival of this market. For the ‘OpenLend’ service, Citibank India has entered into an agreement with the National Stock Exchange Clearing Corporation Ltd (NSCCL), the NSE’s clearing corporation.

FIIs, as lenders of securities, will benefit from Citi’s solution as it would generate incremental revenues for them. For borrowers, the service will provide good access to securities. The service is offered on a fee-based model.

“The primary objective of launching the solution (Citi OpenLend) is to help inject liquidity and volumes into the securities lending and borrowing market,” said Debopama Sen, Managing Director and head of Securities and Fund Services, Citibank India.

Higher turnover

By enabling FIIs and domestic institutions to access this market through Citi’s new service, the international bank expects market activities in securities lending and borrowing to increase substantially.

“We expect the average monthly turnover of the SLB market to go up from the current level of $100 million to $1 billion in next few years.” she said.


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