From Pillar To Post

In early March, Sebi had its eyes set on the March 31 deadline for brokers to enhance the cash component of their margins and additional base capital to 50 per cent. But by the middle of March it was talking of extending the deadline. Why? Because brokers had pleaded that they didn't have enough spare cash after meeting their advance tax liabilities. On March 13, Sebi actually cut the cash margin requirement to 30 per cent. It also withdrew the 5 per cent additional volatility margins on 10 identified scrips. By March-end it was talking of simplifying the three-tier margin system to a single slab. And by the first week of April, when liquidity stringency really started biting into trading volumes, Sebi said sellers would be refunded their margins on the same day.

 

By the end of April, when the Sensex was dropping, the regulator reverted to the strategy of 1995-96 vintage of differential margins for short sales. Indeed, on April 25, it imposed a 5 per cent special margin on short sales one day before its formal risk management committee was to meet. Next day, it withdrew badla cover from naked short sales. Further, after arguing through most of March and April that liberalising circuit filter limits would add to market volatility, it went ahead and installed a more liberal circuit filter system for 200 scrips. There seems to be no method in this except the fact that Sebi is rolling along with the dominant lobby of the day.

Even on key institutional developments like rolling settlements, Sebi has fallen between two stools. Since early this year, Sebi has used the rolling settlement segment like the kalapani for scrips displaying doubtful trends. As a result, volumes in this segment have dried up. So Sebi has used this fact to beat down the argument that circuit filters can be abolished altogether in the rolling segment. The beneficiary of the decision to go slow on rolling settlements has been mutual funds and institutions holding a lot of privately placed paper, fearing that lack of volumes will kill their investments and block exits. The situation today is that some stocks are on rolling settlement, while others are not; surely, there is a case for uniformity, so that no one is worse off in the market. The same applies to initial public offer (IPO) norms where Sebi has changed rules for different sectors. Sebi must realise that its mandate is not just to lend a sympathetic ear but also to act with credibility and consistency. Changing the rules too often robs the strategy of discernible logic.