The Stock Borrow Program allows participants to lend NSCC available stocks and fixed income securities from their account at The Depository Trust Company (DTC) to cover temporary shortfalls in NSCC's Continuous Net Settlement (CNS) System.

Overview

The Stock Borrow Program allows participants to lend NSCC available stocks and fixed income securities from their account at The Depository Trust Company (DTC) to cover temporary shortfalls in NSCC's Continuous Net Settlement (CNS) System.

NSCC credits members' money settlement accounts with the full market value of securities borrowed allowing members to earn interest on that value by investing the funds. In addition, members can loan securities in a safe, controlled environment through this program.

Who Can Use the Service

All NSCC settling members can participate in the Stock Borrow Program. All equity and corporate bond securities are eligible for the program.

Benefits

The Stock Borrow Program enables participants to earn interest on the current market value of their excess DTC positions borrowed by NSCC, while lending securities in the safety of a controlled environment.

• In the Stock Borrow Program, participants' NSCC money settlement accounts are credited on the day of the loan with the full market value of all securities borrowed by NSCC.
• Securities on loan to NSCC are recorded as long positions in a special CNS account set up specifically for the participant's Stock Borrow activity. This enables the member to benefit from lending securities within the CNS processing environment.

How the Service Works

Nighttime Process

By early evening on each business day, participants forward to NSCC a list of securities that are available for borrowing. The list can be transmitted via CPU-to-CPU link or PCWeb Direct. Early in the morning on the following business day, NSCC determines the securities obligations that remain open after CNS clearance processing. NSCC then attempts to satisfy these obligations by borrowing from participants in the Stock Borrow Program.

Daytime Process

By 1:00 p.m. on each business day, participants forward to NSCC a list of securities that are available for borrowing during the day cycle. The list can be transmitted via CPU-to-CPU link or PCWeb Direct. During the day, NSCC determines the securities obligations that are still open for CNS processing. NSCC then attempts to satisfy these obligations by borrowing from participants in the Stock Borrow Program.

Selecting Lenders

If two or more participants are willing to lend the same security, NSCC selects the order of borrowing based on a random algorithm. This procedure permits borrowing to be spread among many potential lenders. NSCC uses the full quantity the first participant makes available in each issue before proceeding to the next participant in the sequence.

Crediting Participants' Accounts

After NSCC borrows securities, the transactions are recorded as long positions in the participant's Stock Borrow "C" Account, a special account in the CNS system. The total current market value of the borrowed securities is credited in the participant's CNS account. This process is reversed when NSCC returns the borrowed securities. No rebates are charged and the entire transaction occurs in the controlled CNS processing environment.

Reporting on Stock Borrow Activity

NSCC distributes reports to participants, reflecting Stock Borrow activity. In reviewing the report, participants sometimes discover that the securities lent to NSCC are needed for customer securities segregation requirements.

In such cases, at the request of the participant, the long position in the Stock Borrow Account is moved into a long position in the Fully-Paid-for "E" Account. Participants are not credited for the value of the securities when the positions are moved to the "E" account (see "fully-paid-for" fact sheet for more information).

For More Information

Please call Relationship Management at 888-382-2721.