After doing some casual research, I realized why I didn't sign up the last time when I was interested. You can only lend out eligible securities in the stocks held by CDP. Eligible securities is defined as securities:
a) where price is less than S$1, fifty thousand (50,000) or more units; and
b) Where price is S$1 or more, S$50,000 divided by price rounded up to the next units.
In any one of the Securities found in Appendix A of this circular.
That's quite a lot to begin with. I looked though my holdings and I don't seem to have so many lots of the same counter, so I dropped the idea. But for anyone of you who had a lot of scrips stored in the CDP, you can make them work a little harder by lending it out to anyone who wants to borrow it at a rate of 4% per year.
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The fees for the lending of scrips can be calculated by the following formula:
Lending Fee = Rate % x Loan Value x Days / 365
Where Rate % = Prevailing lending rate
Loan Value = No. of shares x share closing price at end of each day
Days = Loan duration
I'll quote an example given by CDP for the purpose of illustrating the application of the formula. I certainly have no use for it now, but in the future, who knows? I'll just put it here for my future reference.
If the loaned securities are 10,000 XYZ shares and the lending rate is 4%:
Start date of Loan : 1/10/2001 (Effective date)
Return date of Loan : 4/10/2001 (Expiry date)
Closing price on 1/10/2001 = S$10.00 Market Value of Loaned Securities = 10,000 x S$10.00 = S$100,000
Closing price on 2/10/2001 = S$10.20 Market Value of Loaned Securities = 10,000 x S$10.20 = S$102,000
Closing price on 3/10/2001 = S$10.40 Market Value of Loaned Securities = 10,000 x S$10.40 = S$104,000
Daily fee computation
Fee accrued on 1/10/2001 = 4% x S$100,000/365 = S$10.96
Fee accrued on 2/10/2001 = 4% x S$102,000/365 = S$11.18
Fee accrued on 3/10/2001 = 4% x S$104,000/365 = S$11.40
Lending fee = S$10.96 + S$11.18 + S$11.40 = S$33.54
9 comments :
Do you still entitled to collect dividends if the shares are loaned out?
Lending pple shares to short it against your own holding and making your lose "value" faster?
Not sure emotionally will feel good or not looking at falling stock value?
what website and number to call ?
lend already still have dividends ?
chan :)
Thanks for sharing this info. It may be interesting to get some extra $$ since I am not selling the shares anytime soon.
Hi bro8888,
Yes, you're still entitled to rights, bonuses and dividends while your shares are lent.
http://www.cdp.com.sg/faq/lend_faq9.html
Regarding the problem about lending pple to short your shares...it depends on your horizon I suppose. If you intend to hold it long without doing anything to it, it doesn't matter if there's short term selling on it. You can specify exactly how much of each shares and what shares you want to lend out, so don't think it's a problem.
Hi Chan,
Check out the links posted in the website. There are forms to apply and to post to CDP.
Hi Sanye,
Np :) If you're not selling, I think it's a good way to get some more returns. Just apply if you met the eligibility conditions, no harm right?
I've placed my Kingsmen and SIAEC as eligible securities for lending. So far, no one's borrowed them. :)
Who want to short Kingsmen and SIAEC?
It's not my problem if someone wants to short Kingsmen and/or SIAEC. I'd be happy to receive the 4% lending fee, as well as any dividends accruing to me...
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