In Indonesia, a securities borrowing and lending (SBL) facility is offered by Kliring dan Penjaminan Efek Indonesia (KPEI) for the management of failed trades. Brokers (as clearing members) and custodians can be direct participants, while foreign investors can take part via direct participants. 

KPEI acts as central counterparty to both lenders and borrowers. It maintains a pool within the system to which lenders can offer their stocks and borrowers can check the availability of stocks. Thomas Murray Data Services explains that KPEI calculates the collateral requirement based on initial margin and variation margin – borrowers are charged 15% p.a. plus a flat fee of IDR20,000 per borrowing instruction and lenders receive 12% p.a., based on daily mark‐to‐market value. 

Indonesia has a rudimentary stock fails coverage framework, but this has now been automated, explains Martin Corrall, regional product head for securities finance Citibank & chairman of Pan Asia Securities Lending Association. 

He observes that Indonesia is looking to provide a bilateral stock lending framework, subject to approval by the financial services authority Otoritas Jasa Keuangan (OJK).

 “Indonesia has appointed the Korean Securities Depository in a consultancy capacity to review its market and although it has been delayed until mid-2017 (at least), Indonesia is looking at implementing a bilateral trade or mechanism very similar to the customised trading through the KSD.” 

Andrew McCardle, head of EquiLend Asia says the announcement last year that all trades transacted in Indonesia would need to be collateralised using Indonesian rupiah has shifted the focus elsewhere. “In the immediate future Indonesia is seen as a less attractive emerging market for securities-based lending,” he adds. “The focus for a number of firms is on markets that are emerging with much lower barriers to entry.” 

Repo 

Repo on government securities is available and trades are settled on a same‐day basis. Existing regulation does not clearly define the participation of foreign investors in the repo market. 

Regulation No. 9/POJK.04/2015 on Guidelines for Transaction of Repurchase Agreement (Repo) for financial services institutions (which standardises the practices surrounding repo transactions based on GMRA Indonesia, covering record keeping, reporting, controls, risk management, failure events and relevant procedures and potential sanctions) came into force on 1 January 2016.