Securities borrowing in Singapore is a financial arrangement where an investor or institution temporarily borrows shares from a lender (typically a broker, custodian bank, or another investor) in exchange for a borrowing fee and collateral. It is the mechanism that enables short selling, fails-management, and certain arbitrage strategies on SGX. The Securities Borrowing and Lending (SBL) framework is regulated by MAS and SGX. This page is for general information only and does not constitute financial advice.
How Securities Borrowing and Lending (SBL) Works
The SBL process in Singapore:
- Borrower (typically a short seller or institution needing shares for settlement) requests a specific stock from a lending pool
- Lender (broker, custodian, or securities lending programme participant) makes shares available at an agreed borrowing fee
- Collateral is posted by the borrower — typically 102–110% of the market value of the borrowed securities in cash or equivalent
- The borrowed shares are transferred to the borrower, who may then sell them in the open market (for short selling)
- On the agreed return date, the borrower returns equivalent shares and the collateral is released
Borrowing Fees and Costs
Borrowing fees on SGX-listed securities vary significantly based on supply and demand:
| Stock Availability | Typical Borrowing Fee |
|---|---|
| Easily available (large-cap, liquid) | 0.25%–1.0% p.a. |
| Moderate demand (mid-cap) | 1.0%–4.0% p.a. |
| Hard to borrow (highly shorted, illiquid) | 5%–15%+ p.a. |
Who Participates in SGX SBL?
On the lender side: institutional investors (pension funds, insurance companies, ETF providers) who hold large long-term share positions and earn incremental income by lending them out. On the borrower side: hedge funds, proprietary trading desks, and market makers who need to borrow for short selling or settlement purposes. Retail investors in Singapore can access SBL indirectly through their broker’s margin/SBL account facility.
Securities Borrowing vs Margin Lending
These are related but distinct:
- Securities borrowing: Borrowing actual shares from a lender, primarily to facilitate short selling
- Margin lending: Borrowing cash from a broker to buy more securities — see the Margin Account Singapore glossary entry
Why Long-Term Investors Should Understand SBL
If you hold shares through a brokerage that participates in securities lending, your shares may be lent out to short sellers — earning you a small fee in some programmes. This is generally transparent and your economic exposure is unchanged. For dividend investors, be aware that dividends paid while your shares are on loan may be received as “manufactured dividends” (cash equivalents) rather than actual dividends, which can have different tax or CDP notification treatment. For more on the interaction between short selling and S-REIT investing, see the Short Selling Singapore entry and our Best S-REITs Singapore 2026 guide.