India's clearing house launches a three-day SLB contract with no early exit, no rollover and no foreclosure for corporate events. Available from Aug. 17 for derivatives-segment stocks.
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NSE Clearing will start offering securities lending and borrowing contracts that settle the reverse leg three days after the trade, a new product it calls the R3 series. The contracts become available from the transaction day of Aug. 17, the clearing house said in a circular on Friday.
The first leg settles on T+1 as usual, but the reverse leg is scheduled for T+3, excluding settlement holidays. That is a tighter window than existing SLB contracts, which run from three days to 12 months with fixed monthly tenures.
The R3 series strips out the flexibility that comes with those longer contracts. There is no facility for early repay, recall or rollover, NSE Clearing said. The contracts also will not be foreclosed if an annual general meeting or extraordinary general meeting occurs during the three-day tenure.
For lenders, that means a firm lend with no ability to pull back shares for a corporate vote. For borrowers, the position is locked for the same period, with no early exit to cut a short bet.
The contracts are available only for stocks listed in the Equity Derivatives Segment. The security file the exchange publishes on Aug. 14 will include the new series. Other rules on market timings, clearing, settlement, risk management and corporate action handling remain the same as existing SLB contracts, NSE Clearing said.
SLB in India runs through an automated screen-based platform where orders match on price-time priority and participants quote a lending fee per share. Existing contracts let lenders request early recall and let borrowers repay and relend. The R3 series removes those features in exchange for a tighter settlement window.
The shorter tenure cuts counterparty risk for both sides since the exposure window narrows to three days. The absence of early recall or foreclosure means participants cannot react to mid-contract events.
For short sellers, the R3 series offers a way to borrow shares for exactly three days without the administrative overhead of managing an early repay. For institutional lenders, it guarantees the shares return on a fixed date, but at the cost of giving up the ability to recall for a meeting.
NSE Clearing did not say whether it plans to expand the series to longer tenures. For now, the R3 contracts remain a daily-generated, three-day-only product tied to the derivatives segment's eligible stocks.
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