http://www.dtcc.com/~/media/Files/Downloads/l...13-13.ashx
Today, NSCC Members may elect to participate in the
Today, NSCC Members may elect to participate in the
Stock Borrow Program by designating specific securities that are in their inventory at
DTC to be available to be borrowed by CNS. If CNS cannot complete a delivery to a
long Member because a short Member has not completed its delivery to CNS, NSCC
looks to those designated securities and initiates deliveries from lenders to CNS if the
lending Member has free excess positions at DTC. In turn, CNS delivers the position to a
long Member and sets up a pending receive for the lending Member. If the position is not
returned to the lender by the end of settlement day, i.e., the Member with the original
obligation to deliver to CNS does not complete that delivery, the lender receives full
market value for the securities through NSCC settlement.
1
To be CNS-eligible, a security must be eligible for book-entry transfer on the
books of The Depository Trust Company (“DTC”), an NSCC affiliate, and must
be capable of being processed in the CNS system; for example, securities may be
ineligible for CNS processing due to certain transfer restrictions (i.e., 144A
securities) or due to the pendency of certain corporate actions. Page 4 of 19
In 2007, NSCC borrowed a daily average of approximately $1.85 billion in market
value at the close of each day from the approximately 21 Members that participated in the
Stock Borrow Program that year. Usage of the Stock Borrow Program has since dropped
by almost 95%. In October 2013 only three Members participated in the Stock Borrow
Program, and the average daily value borrowed at the close of day during that month was
approximately $81 million. Usage of the program has continued to drop since the end of
October 2013. Given this dramatic reduction in the use of the program, NSCC has
determined that it is not economically efficient to maintain the service, and NSCC is
proposing to amend its Rules in order to discontinue the Stock Borrow Program. NSCC
has informed the Members using the Stock Borrow Program of its intent to discontinue
the program
