Nse Slaps Curbs To Pare Trading Risks

The National Stock Exchange (NSE), to curb market risks and the incidence of fake and forged shares entry, has decided that one trading member would not be allowed to trade with another without prior permission from the exchange. An official notice has been sent by the exchange to its members on this issue.

The exchange approval will be required both in case of spot and normal transactions. The move has been aimed at preventing the members from indulging in deals which will result in the introduction of fake/forged shares into the system.

Exchange officials said, earlier there was a risk at the markets of brokers (who were not in a financial sound position) to trade through another member and execute orders. A NSE official said this is a measure taken to prevent unscrupulous members from indulging in malpractice.

 

The trading members have also been prevented from trading from any another terminal, other than the one allocated to him at a specific centre.

"If any trading member has a genuine reason for dealing with another member, then the exchange will permit such a deal. But then, the member has to take prior permission and state the valid reason for such a move.

There are instances when a particular member's terminal had been shut down for some time, which prevented him from trading. Under such circumstances, the trading member could approach another member for trading," a NSE official said.

Sources said the logic is that if the member is in a position to trade from his own terminal, there is no reason why he should deal through another member.

Despite this, if a member deals with another member, this gives sufficient reason for suspicion. The exchange officials feel that if any member approaches the exchange to deal with another member without a valid reason, then the bourse can keep a track of his activities.

It is believed that the move will help the exchange in checking the entry of forged and fake shares into the system.

The exchange officials are of the view that no genuine member would route his deal through another member till there is some ulterior motive behind the move. The exchange monitoring would become more stringent following this move.