Securities Lending

Marketplace Mechanics

Detailed mechanics of offer creation, deal matching, lifecycle management, and corporate action handling on the Dualis securities lending marketplace.

Offer Creation and Matching

Lenders create offers by specifying the parameters of their lending terms. Each offer is represented as a DAML contract on Canton, visible to all eligible participants based on their KYC status and jurisdiction.

An offer includes the following parameters:

  • Security identifier — ISIN, CUSIP, or internal token ID of the instrument being offered.
  • Quantity — The total number of units available for lending. Fractional quantities are supported.
  • Fee rate — The annualised lending fee in basis points, paid by the borrower.
  • Minimum collateral ratio — The required over-collateralisation level, which may be overridden by credit tier defaults.
  • Accepted collateral types — A whitelist of collateral assets the lender is willing to accept (e.g., USDC, tokenized treasuries, Canton Coin).
  • Term — Open-ended or fixed-duration, with optional minimum and maximum loan periods.

The Dualis matching engine continuously evaluates outstanding offers against incoming borrow requests. Matching considers fee compatibility, collateral preferences, and credit tier eligibility. When a match is found, a pending deal contract is created atomically on Canton.

Direct Negotiation
Participants may also bypass the matching engine by negotiating directly with a specific counterparty. In this case, the borrower exercises a choice on the lender's offer contract, creating the deal bilaterally.

Deal Lifecycle

Once matched, a deal progresses through a well-defined lifecycle enforced by the DAML contract:

  1. Pending — The deal contract is created. The borrower has a configurable window (default: 30 minutes) to post the required collateral. If the window expires without collateral being posted, the deal is automatically cancelled.
  2. Collateralised — Collateral has been locked. The lender confirms the transfer and the securities are delivered to the borrower's Canton party.
  3. Active — The loan is live. Fees accrue on a per-second basis using the protocol's interest accrual index. Collateral is continuously monitored against mark-to-market valuations.
  4. Returning — The borrower initiates the return. The contract verifies that the returned securities match the original instrument and quantity.
  5. Settled — All obligations are fulfilled. Collateral is released, fees are distributed, and the contract is archived on-ledger for auditability.

Corporate Action Handling

Securities may be subject to corporate actions during the term of a loan. Dualis handles these events programmatically through dedicated DAML choice handlers:

Dividends

When a dividend is declared on a lent security, the borrower is contractually obligated to make a manufactured payment equivalent to the dividend amount. The smart contract automatically debits the dividend equivalent from the borrower's collateral or settled balance and credits it to the lender.

Stock Splits

Stock splits adjust both the loan quantity and the collateral ratio proportionally. A 2-for-1 split doubles the number of lent shares while halving the per-unit valuation, keeping the total loan value and collateral ratio unchanged.

Rights Issues

For rights offerings, the lender retains the right to participate. The contract provides a recall mechanism (see below) that allows the lender to recall securities before the rights record date. If the lender chooses not to recall, a cash-equivalent compensation is calculated and credited.

Ex-Date Awareness
Corporate action handlers execute automatically based on on-chain event feeds. Participants should monitor upcoming corporate actions via the Dualis dashboard to plan recalls or position adjustments ahead of record dates.

Recall and Buyback Mechanics

Open-ended loans support two mechanisms for early termination:

Lender Recall

The lender may recall securities at any time by exercising theRecall choice on the active deal contract. The borrower receives a notification and has a settlement window (default: 24 hours for equities, 48 hours for fixed income) to return the securities. Failure to return within the window triggers an automatic liquidation of the borrower's collateral.

Borrower Buyback

The borrower may terminate a loan early by exercising theReturn choice. Fees are calculated pro-rata up to the return timestamp. There are no early termination penalties on open-ended loans.

Fractional Lending

Dualis supports fractional lending, enabling participants to lend or borrow partial units of a security. This is particularly relevant for high-value instruments such as tokenized bonds or RWA positions where full-unit lending would limit market participation.

Fractional positions are tracked with up to 10 decimal places of precision on Canton. Collateral ratios, fee accruals, and settlement calculations all operate at the same precision level, ensuring no rounding-induced discrepancies.

Partial Fills
A single lender offer can be partially filled by multiple borrowers. Each partial fill creates a separate deal contract, allowing the lender to track and manage each borrowing relationship independently.
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