Probe Nse Stock Lending, Says Bse

The Bombay Stock Exchange authorities have asked the Securities and Exchange Board of India to probe the automated stock lending and borrowing module (ALBM) of the National Stock Exchange.

BSE said the module is similar to the BSE badla (carry-forward) mechanism, but without the risk-containment measures. The exchange has also asked the regulator to verify whether the module contains all the margins, carry-forward positions (gross position, scrip, time).

BSE vice-president Deena Mehta confirmed the move, but declined to comment on the issue.

However, a BSE official said, "Whether appropriate margins_individual broker's positions and other restrictions on gross basis for allowing the modified carry-forward system (MCFS)_are also in place at the module is being disputed."

 

NSE officials, however, refused Probe NSE stock lending, says BSE to comment on the issue saying it was for Sebi to take a view.

At present, several restrictions are imposed by Sebi for any carry forward positions at the BSE. Primarily, a BSE broker can carry forward positions of only Rs 20 crore per card. Secondly, there is a scrip-wise restriction of only Rs 4 crore on each buy and sell side per card and all positions can be carried forward for only 75 days.

As per the Sebi guidelines for carry forward transactions, the BSE is imposing cash margins ranging between 15 and 35 per cent per stock and the securities in badla mechanism are always with the custodian. Whether all the above guidelines are being followed by the NSE at the ALBM segment is being discussed.

The contention is that in a sense, the ALBM segment at NSE is quite similar to the carry forward mechanism adopted by some exchanges including the BSE, but while the NSE allows ALBM in demat stocks, at the BSE only 140 stocks pertaining to the forward group are allowed to carry forward their positions. Further, with the security against any carry forward stock mechanisms being with the clearing house of the BSE, the chances of any errors are relatively less, contended a Bombay exchange official.