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In bond borrowing and lending transactions, a lender lends bonds to a borrower, and after mutually agreed period, the borrower repays the lender with bonds of the same type and quantity. JSF serves as a broker between borrowers and lenders.
The bond borrowing and lending transactions market was established
in May 1990 for the purpose of covering bonds sold short, and was followed in
April 1996 by the introduction of REPO (cash-collateral bond borrowing and lending
transactions). JSF was the first company in Japan to be authorized to offer such
brokerage services, because JSF can link securities industries and financial industries
on neutral ground and is well versed in handling of bond transactions.
JSF receives applications from both parties and, on their behalf,
lends and borrows bonds on the basis of loan agreement. This type of arrangement
has several advantages, including helping to form a transaction that matches the
needs of both lender and borrower, maintaining high confidentiality of information
to ensure the complete privacy of both parities, and transferring all counterparty
credit risk to JSF. The arrangement also contributes to creating fair and stable
market by publicly disclosing indication via QUICK, Bloomberg, and other information
services. |
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| JSF borrows bonds after depositing cash collateral with a lender and then lends bonds after receiving cash collateral from a borrower. This transaction can be either a Special Collateral transaction that specifies an issue or a General Collateral transaction that does not specify an issue. |
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Ordinary bond borrowing and lending transactions |
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| JSF, in principle, borrows bonds without collateral from a lender and then lends bonds after receiving collateral from a borrower. |
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