Cse Seeks Temporary Relief On Margins Issue

The administrators have sought time from the regulator to allow the exchange to accept shares instead of bank guarantees from brokers and allow margin payment based on net loss (and not the gross amount). It will not implement the concentration ratio margin till base data figures are compiled for three months from the date of announcement.

CSE top brass pointed out that the latest Sebi directives on margins marks a radical change from the existing norms of the exchange, which is why its implementation will take time.

Sebi guidelines require payment of mark-to-market margin and the additional capital for increased business in the form of cash or bank guarantee from a scheduled commercial bank. Since brokers currently are unable to provide bank guarantee, the CSE governing body sought temporary relief from the stringent directive.

 

Exchange officials, meanwhile, have advised members to negotiate the issuance of bank guarantees with their bankers to substitute the deposits with the exchange at the earliest.

According to Sebi, 100 per cent of the notional loss (the difference between the buy/sell price and the closing price of the scrip for that day) for a broker for a particular day would be collected as the mark-to-market margin. CSE brokers, will pay margin on net loss.

The exchange has not put the concentration ratio margin into practice, saying that they need "base data figures" to relate it to a corresponding time period for evaluating and implementing the margin on the members.

Exchange authorities yesterday informed its members that a modified mark-to-market margin and intra-day trading limit will become effective from October 14.

Sebi has also set intra-day trading limits that would not exceed 33.33 times the base minimum capital deposited with the bourse. This limit would be on a gross basis (purchases plus sale). This will be implemented at the exchange as per Sebi rules.

The CSE notice also asks the members to "comply and ensure that sufficient deposits are maintained (or paid) to cover mark-to-market margin as indicated in members DPS tally sheet".

At the time of the announcement in mid-August, the CSE top brass had felt that it would be unable to put into practice Sebi's latest directive on additional normal margins and concentration ratio margins due to the lopsided nature of the trading at the exchange.

Market sources had opined that as trading is confined to merely six scrips, concentration is not just prevalent, but overwhelming. Under the circumstances, every member may be required to pay up the margin since trading is spread across just six scrips. Jobbers too will face serious problems as they operate only in particular scrips, and therefore an element of concentration is built into their business.

Senior members of the bourse and exchange officials has also blamed backward technology. It is not possible to trace the trading patterns of individual market players with the manual systems in operation, say the top brass, and therefore paying margins on the concentration patterns of their trade is not possible.

Civic body blamed for on-line delay

The Calcutta Stock Exchange authorities have blamed the Calcutta Municipal Corporation for delaying the implementation of their plans for an on-line trading system. CSE authorities say the corporation has not given the exchange permission to dig the road around Lyons Range to lay networking cables. CSE authorities add that though CMC has given them an in-principle approval, it has asked CSE to sign a formal agreement on this. A draft has been drawn up by CSE which includes payment of Rs 2.5 lakh one time charge.