- Dec. 27, 2019
- Dec. 26, 2019
- Dec. 26, 2019
As of June 10, 2019
Bank of Japan
Financial Markets Department
This document is an outline of the Securities Lending Facility (SLF), which the Bank of Japan operates based on the "Principal Terms and Conditions for the Sale of Japanese Government Securities with Repurchase Agreements to Provide the Markets with a Secondary Source of Japanese Government Securities." Please note that the following information may change in the future.
The Bank's Head Office (Operations Department).
The Bank shall decide on the conduct of auctions in light of the conditions of financial markets.
Such conditions shall be limited to the following two for the time being.
Among the Japanese government securities (JGSs) held by the Bank, issues to be sold shall be selected pursuant to the Bank's relevant rules. Issues to be sold shall be as follows for the time being.
Securities sold shall be repurchased on the business day following the sale date.
A multiple-price competitive auction under the conventional method shall be conducted for each sale in which counterparties bid "selling yields" (yields for the period during which securities are held by counterparties).
With the aim of setting a "minimum fee rate," the Bank sets an upper limit on selling yields taking account of conditions in financial markets.
The upper limit on selling yields will be considered in light of the Tokyo Repo Rate and the developments in fee rates applied to financial transactions, to prevent market participants from relying excessively on this facility. Specifically, the upper limit on selling yields, in principle, shall be calculated as follows: The rate considered in light of the Tokyo Repo Rate1 minus the minimum fee rate2.
When operating the SLF, the Bank selects auction participants from eligible counterparties and notifies them of the following matters through the Bank of Japan Financial Network System (BOJ-NET).
Auction participants notify the Bank of their desired selling yield and desired amount of purchase per issue, and the total amount through the BOJ-NET by the bid-submission cut-off date and time notified in subsection A.
The Bank, after receiving bids as described in subsection B, accepts bids by starting with the lowest desired selling yield and continuing up until the total amount of bids accepted reaches the amount offered per issue. However, the Bank reserves the right to reject all or some of bids which a counterparty submits when deemed appropriate, such as when counterparties bid for a certain issue which they have consecutively been purchasing from the Bank for a certain period5.
When accepting bids, the Bank, through the BOJ-NET, notifies auction participants who submitted bids as described in subsection B of the issues it will sell, selling yield and amount of sale per issue. Here and hereinafter, those who receive such notifications will be referred to as purchasers.
On the sale date notified in subsection III. A, the Bank delivers JGSs to the purchaser simultaneously with the purchaser's payment of the selling price to the Bank.
On the repurchase date notified in subsection III. A, the purchaser delivers JGSs to the Bank simultaneously with the Bank's payment of the repurchasing price to the purchaser.
Purchasers may request a roll-over of JGSs purchased from the Bank up to 21 times per issue pursuant to the Bank's relevant rules. When requesting roll-overs, purchasers shall submit a form by the cut-off date and time set by the Bank.
The Bank, after deciding to accept or reject a roll-over request, promptly notifies the purchaser who made the request by telephone or another method.
JGS transfers are not necessary.
For fund settlements, the difference between the final price of a transaction eligible for a roll-over and the initial price of the roll-over will be paid to or deducted from the purchaser's current account.
The same transaction as that described in section IV. B will be undertaken.
The selling price shall be calculated as follows:
Margin ratios are decided in accordance with the types of JGSs and their residual maturities. (Please see 2. of "Margin Ratios for the Purchase/Sale of Japanese Government Securities with Repurchase Agreements" for specific numbers.)
The repurchasing price shall be calculated as follows:
Please refer to the "Operation Timetable" for the timetable of operations described in sections III and IV.