Calcutta, May 26: BSE president M G Damani has made a forceful plea for the reintroduction of badla with fewer restrictions, even as the J R Verma committee is collecting feedback from the exchanges.

The only opposition to badla is reportedly from R H Patil, the managing director of NSE, who is rooting for derivatives as a hedge instrument.Sources point out that relaxed norms for carryforward trading are now almost certain as the Finance Ministry apparently is not objecting to it .

The need for review has arisen because the revised carryforward format approved by SEBI in July 1995 had found few takers in the broking community. This has been highlighted by Damani in a recent letter to Sebi chairman D R Mehta.

Damani says: "The revised carryforward system was started in the A group in BSE (the only online exchange then) from January 15, 1996. Of the 231 members who opted for it in January 1996, only 126 are left now. On an average, only 2 lakh shares worth Rs 46 crore are carried forward every settlement."

He continues: "This is in contrast to pre-December 1993 experience when the value of carryforward business was in the range of Rs 600 crore. Even after adjusting for a shorter settlement period and fewer scrips in the specified group, the value of carryforward business was more than 10 times then."

The absence of "healthy" speculation, coupled with efficient screen-based trading systems, has given rise to "scalpels" in the market. Scalpels do not take a long term view of the economy, industry or any company. " A senior broker of CSE feels that carryforward should be reintroduced and quantitative restrictions can be imposed on an exchange-to-exchange basis.

"Badla imparted liquidity to the system and also encouraged investors to go for delivery-based trades. The situation now is that delivery-based trades have dried up and speculation has increased disproportionately," he adds.

The suggestions given by Damani for making carryforward simpler and workable are: *allow squaring up of delivery trades. This will turn scalpels into short- term traders within the carryforward system; *limits/sub-limits should be removed as BSE is strict in enforcing capital adequacy norm of 3 per cent. Besides, the market risk has reduced with a shorter settlement cycle and surveillance has been toned up; *daily reporting should be dispensed with; *vyaj badla shares should be given to financiers. In the existing system, vyaj badla shares have to be compulsorily deposited with the clearing house.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.