Nse Amends Bye-Laws For Transfer Of Membership

The National Stock Exchange (NSE) has amended its bye-laws to allow for transfer of membership in cases where the dominant partner is set to change. However, the five-year lock-in period remains.

The fresh amendment would mean that brokers have been provided the exit route at the markets by finding a dominant partner to whom the sale can be made. Senior NSE officials said the Securities and Exchange Board of India has already approved the changes early this week.

This move will allow dormant players at the markets to dispose of their membership to active players or new entrants in the markets (who are flush with funds).

 

NSE deputy managing director Ravi Narain said the process of transfer has been streamlined through this step.

Earlier, the member-dealer firm facing a proposed change in shareholding had to approach the exchange for reconstitution of membership.

This case was then presented to the membership approval committee.

Now, the process has been smoothened, whereby a case of transfer of membership could be reviewed immediately by the exchange, Narain said.

The bourse has, however, clarified that the lock-in period would remain and is independent of the issue of change in ownership. At present, there are over 1,000 members at the NSE.

The cases involving the change in shareholding pattern relate to three categories:

Demise of the main trading partner

Retirement of 2-3 main partners in the trading firm

Buyout of the parent company in the case of a corporate entity.

The amendment gains significance in that the number of active players at the NSE would gradually move up, ensuring higher trading activity, sources said.

According to sources, in recent months, there were several cases of NSE brokers who were scouting for players to whom the card could be sold to.

The Association of NSE Members of India had been lobbying hard for this move, saying that several trading members were finding it difficult to carry on with their trading business due to increased competition and poor market conditions.

A senior NSE official said that while the market has been rife with rumours of players wanting to opt out, several members remained long-term players, who would be keen to make a presence at the markets once the bad patch was over.

Further, with the member having paid the Rs 55 lakh initial membership fee, the issue of payment of interest on this amount would remain unresolved in the case of transfer of membership.