NSE to cart members' shares to clearing corporation
OUR MARKET BUREAU
MUMBAI, January 20: In an attempt to bring upcountry brokers at par with Mumbai-based brokers, the National Stock Exchange (NSE) has decided to take up the responsibility of transporting settlement-related documents to the National Securities Clearing Corporation (NSCC), for central netting of transactions.The decision to this effect was taken by the executive committee of the exchange at its meeting held here on Tuesday. This provisioning, which would cost the exchange about Rs 2.5 crore annually, will be free of cost to the members and would form a part of the operating cost incurred by the exchange. ``Earlier, a member bore the cost as well as risks involved in central netting at Mumbai,'' said NSE managing director RH Patil. The brokers would now save upto Rs 6 lakh per year in operating costs, he said, adding: ``as a direct fallout, we expect delivery ratios to go up.''According to Patil, the exchange has finalised a unique software that would give an updated status of the local and
centrally-netted positions at the end of each settlement. Moreover, the exchange has also taken an insurance cover for the transit of the shares. The cover, which is known as the Immediate Replacement Cover, is valued at Rs 90 crore. This value-added service would also be offered to the members without any cost. The executive committee of the NSE comprises 22 brokers and 3 custodians. The committee also decided to offer the brokers with an option to pay a fine of Rs 5,000 if they violate their gross exposure limits. Earlier, brokers who violated the 7 times limit had to deposit an additional base capital with the exchange which was locked for a period of three months. However, on representations made by the brokers and on studying the case of the smaller brokers who faced liquidity problems due to this compulsory lock-in, the committee decided to offer this option instead of either paying a fine or maintaining an additional base capital. Henceforth, the exchange has decided to intimate investors
and the broking community about the intentions of the broker to surrender his trading rights. The committee has also decided to reduce the mark up from 20 per cent to 10 per cent on bad deliveries reintroduced by brokers.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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