Sebi Derivatives Panel Mulls Centralised Clearing House

The Securities and Exchange Board of India (Sebi)-appointed L C Gupta Committee on derivatives trading is discussing the possibility of a centralised clearing house in the country specifically for derivatives trading.

The panel, according to a member, is debating whether, going by the very nature of derivatives trading, there should be a separate clearing house to settle trades. Besides, a centralised clearing house would take care of all derivatives trading nationwide, it is felt. The committee is to submit its recommendations to Sebi in three months and a meeting of the panel is also slated later this week.

The panel, the source said, is also looking into the aspect of conducting the trading on derivatives through either a separate exchange or a separate segment of the exchange. ``The derivatives segment has to be clearly demarcated and has to be segregated for the sanctity of the market, the member said. The NSE has been the first exchange in the country to formally put forward a proposal on derivatives before Sebi. However, the proposal has now been pushed onto the back-burner since Sebi itself is not ready with the regulatory and operational framework for the scheme. NSE has proposed to launch derivatives with index-based futures and then go into options trading.The legal hurdles have also been removed, the panel member said.

 

Another point being considered is whether the derivatives trading can be undertaken by the member of the stock exchange by using the same net worth as for routine trading, or whether the firm should have a fresh balance sheet for derivatives alone.

``How much exposure and risk can the dealer take on the same net worth? The issue therefore is wheth-er the same broker can get into it on his own, or whether he would have to set up a subsidiary only for the purpose of derivatives. NSE envisages a Rs 3-crore net worth for derivatives with Rs 5-crore requir-ement for those opting for option writing.

BSE for badla relaxations

Sourav Majumdar CALCUTTA

The Bombay Stock Exchange has said it is not pressing for a revival of the old badla system, but wants some key relaxations in the G S Patel Committee stipulations governing carryforward. BSE president M G Damani said yesterday the carryforward volumes were picking up at his exchange, and were clocking over Rs 90 crore per settlement. ``By end-March the volumes will touch Rs 150 crore even if there is no review of the carryforward system. But if there is a review, the volumes will touch Rs 500 crore by end of April, Damani told Business Standard. The BSE, he said, was pressing for easing of the strict limits and sub-limits of the existing carryforward system.

The Sebi board is expected to debate BSEs proposal at its next meeting. But Damanis stand makes it clear that the old badla is not what Sebi may be discussing.

The BSE president said much of the ground realities had changed since badla was banned in 1993 by Sebi. There is capital adequacy, mark-to-market margins, weekly settlements, and even special margins, he said. ``Even when the Sensex rose and fell 10 per cent on January 16, the BSE did not have to shut off a single terminal for even one minute, Damani said, underscoring the fact that market sanctity was intact at the bourse.