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Most retail stock brokers strike work; volumes pathetic

Volumes at India's two major stock exchanges fell sharply on Monday after most brokers boycotted trading to protest tough regulations, which has hurt their business.

By 1140 hrs (IST), the traded volume at the Bombay Stock Exchange, India's oldest bourse, was around Rs 35 million or around 100,000 shares compared with a normal average of Rs 2.0 billion or 1.5-2.0 million shares, brokers said.

The boycott had a lesser impact on the National Stock Exchange (NSE), the country's largest, which notched a volume of Rs 250 million or 1.3 million shares, against a normal volume of over Rs 3.0 billion or 10 million shares, they said.

The protest was against a series of measures initiated since July 2, when a popular carry-forward facility was banned. In its place, the exchanges launched index and stock options and shifted to a T+5 rolling settlement from fixed weekly account periods.

The carry-forward refers to a century-old practice which allowed investors to take on bigger positions than they could otherwise afford by buying shares on credit, and postponing payment.

The facility accounted for about 90 per cent of the volume at India's leading exchanges.

The practice was banned after it was blamed for a payment crisis in March, which triggered a six-week market slide pulling prices down 27 per cent and caused an uproar in parliament.

DEMANDS

"We want the introduction of some margin products and deferral products and the limit on bank funding for stock brokers be raised," a spokesman for the Association of NSE Members of India told Reuters.

The AMNI, which has around 750 members out of the nearly 1,000 brokers registered with the NSE, and the 500-member BSE Brokers Forum are heading the protest.

In a joint statement made in advertisements in local newspapers on Monday the two organisations said that derivatives products introduced by the regulatory authorities are hedging instruments and could not be substitutes for lending and borrowing of money and shares.

"Brokers are not against rolling settlement. In fact, they (brokers) welcome all reforms that make the Indian markets of international standards," the advertisement said.

Dilip Bagri, the vice chairman of the BBF, said the new regulations was affecting business at domestic brokerages.

"They should allow some alternate financing methods (to the carry-forward system)," he said.

He said the protest was also to highlight the forum's earlier demands such as a 0.01 per cent broker registration fee imposed by the capital market regulator.

The Securities and Exchange Board of India imposed the fee in 1994, and is now demanding brokers pay the interest owed while appealing the fee in courts, brokers say.

BBF is also demanding that shares under rolling settlement be allowed to be traded on a weekly settlement cycle until a newly established derivatives market becomes more vibrant.

Around midday, the Bombay Sensitive index was down 0.79 per cent to 3,314.48, while the broad-based National Stock Exchange Nifty index was down 0.97 per cent to 1,067.20.

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