Move Against Nse Indemnity Bond Hots Up
The agitation against the National Stock Exchanges indemnity bond diktat is intensifying. Some of the brokers who have memberships on other stock exchanges are contemplating giving up those to retain the NSE membership.
Brokers, who depend on speculation business, are reluctant to give up local stock exchange memberships, but those with delivery-based dealings are not willing to give up their NSE membership, if the NSE authorities do not change their stand on the indemnity bond.
Members with delivery-based dealings will retain NSE membership as it is safe to take delivery from NSE, which gives a guarantee to rectify the wrong within 21 days only, said an NSE member.
It is understood that if the members are forced to give up membership of any one of the exchange, it will adversely affect arbitrage opportunities for brokers resulting in lower volume and profitability for the broking outfits.
A section of brokers, however, feel that, ultimately, the choice between the membership of either of the exchanges will depend on the future prospects of the exchange and the viability of the broking activity of the concerned member, said a broker who is a member of both the NSE and the Bombay Stock Exchange.
It will be left to the discretion of individual members whether they want to furnish the guarantee or not, said yet another Calcutta broker.
Moreover, it appears that the form circulated by NSE seeking indemnity bond is for an unspecified purpose for an unlimited liability.
Once the indemnity bond is signed, the undertaking-cum-indemnity will remain in force till National Stock Exchange authorities certify in writing the discharge of liabilities of the member.
This undertaking-cum-indemnity is independent of and in addition to any other undertakings, guarantees etc, executed by the member in favour of NSE and shall not in any way be prejudiced or affected by any security tendered by the member, states the indemnity bond form.
Members of the NSE in Calcutta claim that the June 15 deadline for submitting the guarantee was extended to give more time to top institutional broking outfits with financial power who had neither submitted the indemnity bond nor had come to a decision on the issue.
Meanwhile, the National Stock Exchange Members Association (NSEMA) of Delhi has decided not to abide by the recent National Stock Exchange directive with regard to furnishing of a personal guarantee.