Bse To Revise Badla Margins
Under the new format, brokers, when they incur a minimal notional loss, will be subjected to pay a normal carry-forward margin of 15 per cent.
However, if the loss is more than the stipulated 15 per cent limit, the entire notional loss has to be paid as mark-to-market margin.
The new format will be applicable to only those brokers (Type 1) who had opted for the revised carry-forward. No change has been proposed in the carry-forward margin collections for brokers who have booked profits.
Earlier, BSE brokers were subject to two types of margins while dealing in carry-forward scrips: the normal carry-forward margin and an additional mark-to-market margin.
Business Standard had earlier reported that the Securities and Exchange Board of India (Sebi) was likely to effect an exemption on mark-to-margin payment for brokers dealing in forward scrips.
However, corporate circles opposed the proposal saying that an unrestricted carry-forward trading system could be used to hammer down the prices of pivotals.
Second, market sources say that no form of margin (unless brokers are subjected to pay a 100 per cent margin) could fully guarantee against brokers defaulting. A carry-forward margin of 15 per cent was too little to safeguard the safety of the markets, they argued.
Soon after Sebi imposed a three-tier margin structure, BSE sought exemption for its Type I members from having to pay mark-to-market margins. The exchange said that it had already put in place an adequate risk containment system for carry-forward trading.
Sources said that the exchange had adhered to all the recommendations of the GS Patel committee and that the carry-forward system in place was virtually risk free.
BSE sources said that the settlement cycle was fully insured against a possible default both in pay-in and pay-out since the bourse took physical delivery of shares pressed for carry-forward.
Under the Sebi-specified mark-to-market system, an exchange is required to collect 100 per cent of the notional loss incurred by each broker for every scrip on a daily basis.
This loss is calculated as the difference between the buying or selling price and the closing price of the scrip at the end of the day, if the deal is not squared up.