FISE seeks waiver of TGF as pre-condition for demat trading
KVVV Charya
HYDERABAD, January 23: In an attempt to speed up the switch over to demat trading on regional exchanges, the Federation of Indian Stock Exchanges (FISE) has decided to initiate dialogue with the Securities and Exchange Board of India (SEBI) to waive the trade guarantee fund (TGF) as a pre-condition.FISE believes there is no correlation between demat trading and TGF, since the pay-in and pay-out are being routed through the clearing houses and closely monitored by the exchanges. It finds TGF a hitch in the process of demat trade on the regional exchanges. "To ensure active participation by the retail investors, SEBI must allow the regional exchanges to trade on demat stock," FISE president P C Shrimal told The Financial Express. The three member committee, appointed by the FISE to review the demat stock trading system and its problems, is expected to submit its report by the end of January 1998, he said. Based on the report, FISE is scheduled to decide on its next step and meet the market watchdog
in order to ascertain whether the stringent rule would be eliminated. This would, in turn, allow regional stock exchanges to trade on demat form, Shrimal explained. The scheduled FISE meeting, to be held at Ahmedabad on Saturday, will discuss the demat trading on regional stock exchanges, in addition to other topics on the agenda including Chandratre committee report on delisting of securities, revival of primary markets and measures to improve investor confidence. Shrimal said that after the implementation of the mandatory demat trading by the financial institutions, the small exchanges would be denied the institutional business since they cannot offer demat trading. This, in turn, would push the bourses into financial trap with low volumes, he felt. Further, he said, it was not appropriate on the part of the market regulator to impose these sort of stringent regulations on the small exchanges. Only three out of 22 bourses, equipped with TGF, would have the advantage of demat trading, he added. The
apprehensions raised by the FISE members may turn out to be true as NSDL is poised to dematerialise shares of about 163 scrips which have 40 per cent of the total market capitalisation. These scrips include 24 from BSE-sensex and 39 from Nifty. It is reported that about 102 crore shares amounting to Rs 1,200 crore have already been dematerialised so far. "Considering the low transaction costs and elimination of market risks associated with demat trading, the small investor will benefit," Shrimal said. The FISE felt that the benefit shall reach even to the rural and the regional stock exchange investor also, he added.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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