Mumbai bourse bid to plug capital-adequacy loophole
Nalini D'Souza
MUMBAI, January 23: The Bombay Stock Exchange (BSE) has added a new feature in the BOLT network which will restrict member-brokers from trading if they exceed their total capital adequacy limit to touch a maximum of 120 per cent.The move is aimed at restraining members or traders operating on the BOLT net, via a BSE member, from exceeding their trading limits as specified by the exchange. As per the norms of the exchange, a member is allowed to trade upto 33 times of the base minimum capital maintained with the exchange on each trading day. Members contribute Rs 10 lakh as base minimum capital which comprises bank guarantees, deposits and securities. Members who desire to exceed this limit have to deposit additional capital with the exchange. However, the stipulation of trading up to 33 times of the capital maintained remains intact. The exchange has decided to implement the change from January 27. In a note addressed to its members the exchange said: "it is compulsory to download the new version.
Members will not be able to trade on January 27 until the new release of BOLT TWS is downloaded for normal trading." The old version of BOLT TWS had an in-built control system to monitor trades and the extent to which capital was utilised by members. Each time a member exceeded his limit, the system would give out signals to the members. However, the broker was allowed to trade even in the case of his limit being exhausted, with a meagre penalty of Rs 5,000 on every such violation. The new version of BOLT would send out a signal the moment the broker exceeds 120 per cent of his capital adequacy limit and the terminal would be deactivated for the rest of the day. "This would not only help the members to strictly adhere to their capital adequacy norms, but also help us in restricting such errant members from building positions beyond their security base maintained with the exchange," commented a BSE director.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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