Search the Internet          Tips  Sites: Finance, Investment

Brokers seek MPs' support to help bring back deferral products

Kausik Datta

The Securities Industry Association of India, the newly formed forum of share brokers of 16 exchanges, has persuaded some members of Parliament to highlight the necessity of reintroduction of deferral products in the monsoon session of Parliament.

An SIAI member said the association, which will stay away from the markets on Monday to highlight their loss of earnings resulting from very low trading volumes in the newly created cash only market, has received positive response from MPs.

"The MPs we have approached will raise the US-64 issue as well in Parliament, and will eventually take up the brokers' cause in the course of discussions," the member added.

The association will also come out with newspaper advertisements across the country on Monday highlighting reasons behind their decision for staying away from the market as a mark of protest against the withdrawal of deferral products.

SIAI has decided to plead with the government that it should consider steps to revive the markets before the situation deteriorated beyond any hope of revival. "If the market does not revive soon, the FIIs will start pulling out. If IBP trades at Rs 50 only, the government's divestment decision will flop," a broker said.

According to SIAI, the government has introduced option products, which would be used for hedging. The superiority of deferral products over option products is that the former supports funding for trading. This is most crucial for a revival of markets.

SIAI is confident that barring some 10 per cent NSE terminals, the brokers would stay away from their business on Monday.

The brokers would also meet at their respective exchanges to take stock of the situation. Alongside, brokers would also plead for introduction of funding for trading, if badla is not reintroduced, to revive the market.

A member of SIAI said the government should introduce a system allowing banks to lend to stock exchanges at a premium above the money market rates with some margin for overnight positions and reversing those transactions every day.

The system, if introduced, will allow banks to fund exchanges, which in turn will extend support to brokers and they in turn will assist their clients.

Brokers said stockmarket reforms were being implemented more as reaction to a crisis and without adequate study. They argued that deferral products were in line with international best practices where margin trading, lending and borrowing mechanisms are allowed.

With the withdrawal of badla and ban on short selling, the combined daily volumes of the BSE and NSE have come down to Rs 10 billion from Rs 700 to Rs 800 billion a few months ago.

In a separate development, trading on DSQ Software is likely to be banned from July 27 countrywide. A Sebi member said NSE had already announced that it would ban trading on DSQ Software for an indefinite period.

Following the Sebi investigation that the promoters of the company were involved in non-genuine deals with an overseas company, other exchanges are expected to follow suit.

Powered by

YOU MAY ALSO WANT TO READ:
The Rediff-Business Standard Special
The Budget 2001-2002 Special
Money
Business News

Tell us what you think of this report