Stock Lending Agreement for Hong Kong

Stock Lending Agreement Template for Hong Kong

A comprehensive legal agreement governed by Hong Kong law that establishes the terms and conditions for securities lending transactions between institutional parties. The agreement covers crucial aspects including loan mechanics, collateral requirements, rights and obligations of parties, corporate actions, tax implications, and regulatory compliance under Hong Kong's Securities and Futures Ordinance. It incorporates specific provisions addressing Hong Kong stamp duty considerations and local market practices, while ensuring alignment with international securities lending standards.

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What is a Stock Lending Agreement?

The Stock Lending Agreement serves as the primary legal framework for securities lending transactions in the Hong Kong market. It is essential for financial institutions engaging in securities lending activities, whether as lenders or borrowers, and is specifically tailored to comply with Hong Kong regulatory requirements, including the Securities and Futures Ordinance and SFC regulations. The agreement details the mechanisms for lending securities, managing collateral, handling corporate actions, and addressing default scenarios. It incorporates Hong Kong-specific provisions regarding stamp duty, regulatory reporting, and local market conventions while maintaining consistency with global securities lending practices. This document is typically used by financial institutions, asset managers, and broker-dealers operating in Hong Kong's financial markets.

What sections should be included in a Stock Lending Agreement?

1. Parties: Identification of the lender and borrower, including registration details and regulated status

2. Background: Context of the agreement and brief description of the transaction type

3. Definitions and Interpretation: Key terms used throughout the agreement, including market standard definitions and jurisdiction-specific terms

4. Loans of Securities: Core provisions governing the lending and borrowing of securities, including loan mechanics and procedures

5. Delivery and Redelivery: Procedures and timing for delivering securities and returning them at termination

6. Collateral Requirements: Provisions regarding posting, maintaining, and returning collateral, including margin requirements

7. Income and Corporate Actions: Treatment of dividends, rights issues, and other corporate actions affecting borrowed securities

8. Rates and Fees: Lending fees, rates, and payment mechanisms

9. Tax and Stamp Duty: Tax implications, withholding requirements, and stamp duty considerations

10. Events of Default: Circumstances constituting default and consequences

11. Close-out and Set-off: Procedures for terminating transactions and calculating settlement amounts

12. Representations and Warranties: Standard and transaction-specific representations by both parties

13. Regulatory Compliance: Compliance with SFC requirements and other applicable regulations

14. Governing Law and Jurisdiction: Hong Kong law as governing law and jurisdiction provisions

What sections are optional to include in a Stock Lending Agreement?

1. Agency Provisions: Required when either party acts as agent for underlying principals

2. Custody Arrangements: Needed when involving third-party custodians

3. Eligible Collateral Expansion: Used when parties agree to accept non-standard forms of collateral

4. Mini Close-out: Optional provisions for dealing with fails without terminating the entire agreement

5. Electronic Trading Platform: Required when transactions will be executed through specific trading platforms

6. Buy-in Procedures: Detailed procedures for buying in securities in case of failure to deliver

7. Force Majeure: Additional provisions for market disruption events

8. Central Counterparty Provisions: Required when transactions will be cleared through a CCP

What schedules should be included in a Stock Lending Agreement?

1. Schedule 1 - Agency Terms: Detailed terms applicable to agency transactions

2. Schedule 2 - Eligible Securities: List and characteristics of securities eligible for lending

3. Schedule 3 - Eligible Collateral: Permitted types of collateral and applicable haircuts

4. Schedule 4 - Margin Percentages: Required margin levels for different security types

5. Schedule 5 - Contact Details: Administrative and operational contact information

6. Schedule 6 - Systems and Operations: Operational procedures and systems requirements

7. Schedule 7 - Forms and Notices: Standard forms for borrowing requests, recalls, and other notices

8. Appendix A - Tax Documentation: Required tax forms and certificates

9. Appendix B - Fee Schedule: Detailed breakdown of fees and charges

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

Jurisdiction

Hong Kong

Publisher

Genie AI

Document Type

Loan Agreement

Sector

Banking

Cost

Free to use
Relevant legal definitions
Clauses
Relevant Industries

Financial Services

Investment Banking

Asset Management

Securities Trading

Hedge Funds

Banking

Insurance

Pension Funds

Broker-Dealers

Investment Management

Relevant Teams

Legal

Compliance

Risk Management

Securities Operations

Trading

Collateral Management

Settlement

Client Relations

Treasury

Credit

Documentation

Finance

Operations

Product Management

Regulatory Reporting

Relevant Roles

Legal Counsel

Securities Operations Manager

Compliance Officer

Risk Manager

Trading Director

Securities Lending Trader

Collateral Manager

Portfolio Manager

Settlement Officer

Relationship Manager

Chief Operating Officer

Head of Securities Finance

Documentation Specialist

Treasury Manager

Credit Risk Analyst

Industries
Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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