MUMBAI, Oct 6: The Bombay Stock Exchange has decided to get tough with members who deliver wrong shares or an incorrect quantity of shares to the clearing house. It has decided that in addition to a two per cent penalty levied on members who make incorrect deliveries which result in mismatches, it would now close out these shares directly without giving the members a chance to rectify or correct the objections.

The exchange had, vide its notice dated May 15, 1997, decided to impose a penalty of two per cent of the standard rate of the stock on those members who were held responsible for delivering wrong shares. ``Keeping in view the interest of the market and to safeguard the receiving members, the exchange has decided to take this course of action,'' a BSE official said.

The decision was taken by the market operations committee of the BSE at a meeting held on October 1.

Explaining the move, the market operations committee said that while collecting pay-out share pouches from the clearing house, many receiving members have reported that sometimes shares are not in conformity with the delivery or receipt orders attached.

Hence, the exchange has decided to close out such mismatches. The close out would be effected at the closing rates published by the exchange for the scrip in the respective settlement. In case the closing rate is not available for some shares, the close out rate would be effected at the highest price recorded in that scrip on the exchange in the settlement in which the concerned contract had been entered into and upto the date of auction.

The other formula developed by the exchange takes into consideration the 20 per cent value above the official closing price on the day on which auction offers are called for.

However, in the event of there being no such closing price on that day, the official closing price of the last trading day on which a trade was recorded would be considered as the close-out price.

Incase the close out price cannot be worked out as per the methods mentioned above, the price would be determined in a manner specified by the governing board or the executive director.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.