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CSE brokers bypass board, chart out reform course

BS Bureau

The members of Calcutta Stock Exchange (CSE) on Thursday bypassed the exchange board and chalked out a wide range of measures to reform the bourse. The measures, which include strict implementation of margins, rescheduling of pay-in and pay-out time and replenishment of the settlement guarantee fund (SGF) to put the bourse back of the rails, is a clear manifestation of their loss of confidence in the CSE board, said market watchers.

The suggestions came in a day when CSE managed to sail through the Rs 430-million pay-in obligations of settlement No 151 after three troubled settlements had nearly brought the bourse to its knees.

The members' suggestions have been conveyed to bourse authorities and the Securities and Exchange Board of India. Sebi is understood to have advised CSE to go ahead and implement the proposals as soon as possible.

The members have suggested for instance that terminals of concerned brokers should be automatically deactivated in case of shortfall in marked-to-market margins.

The broker would then be asked to immediately square off outstanding positions using the terminal at the bourse's surveillance office.

They have also proposed, for greater convenience, that brokers would be able to make margin payments on-line. Under the system, the exchange would automatically debit the brokers' bank account for margins, without the broker having to pay in funds into the margin account in accordance with exposure. Similarly, the margin balances, too, would be directly credited to the brokers' bank account.

The proposals also include alteration of the pay-in/pay-out schedule by preponing the process by a day. Pay-in would take place on Wednesday, and the pay-out would be completed on Thursday morning. This would ensure that the previous settlement is successfully completed before the badla session starts for the ongoing settlement.

With this new schedule in place, defaulters would not be able to carry forward their positions to the next settlement, as they would be forced to square off their transactions, and the shortfall, if any, would not spill over to the following settlement.

In a move that would prop up the SGF, members also compelled authorities to admit that as much as Rs 190 million could be collected from selling shares which have been lying with CSE against margins of defaulting brokers. The authorities on Thursday put a part of shares on sale and raised Rs 65 million through this route. The balance is expected to be collected shortly.

Members took on the authorities this afternoon when the bourse flashed a notice on trading terminals asking them to declare their badla trades with defaulting members. Frustrated members assembled in front of the executive director's office and forced him to withdraw the notice. Then they decided to come out with proposals for the revival of the exchange.

When contacted a Sebi official, in charge of CSE, said : "Sebi is happy with the members' move to revitalise the bourse. Anything related to improvement of CSE is welcome, no matter where it comes from."

He added: "CSE functioning would automatically be improved once it gets corporatised in June-July. Till then the existing board, is all likelihood, will continue."

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