BSE president Anand Rathi had claimed, while formally announcing the introduction of BLESS in January last, that the new system of stock lending will not have much difference in comparison to the earlier Modified Carry Forward System (MCFS). However, BSE brokers differ with their president's view.

According to them, BLESS has two major weaknesses. It does not allow positions to carry forward in those stocks which are going for no delivery from the subsequent BLESS session. The other major drawback of the system is that computation of margins have overburdened the brokers with various types of margins.

BSE had decided prior to the launch of BLESS, that stocks going under no-delivery in a subsequent settlement would not be available for BLESS system during the BLESS session preceding start date of no-delivery. As such, all positions pertaining to the settlement before no-delivery would result in to the delivery. In case a stock is in no-delivery for more than one settlement then the same would not be available in BLESS for all such no-delivery settlements.

While speaking to The Financial Express Mr Rathi said: "This anomaly in the system has been brought to our notice and we are actively considering to amend this clause as this is going against the interest of the investors."

How this clause is detrimental to investor's interest can be gauged by this example. If a counter like Glaxo, which is considered illiquid, has a net outstanding position of 1,50,000 shares and it is going for no-delivery from next settlement, then investors in this stock will have to compulsorily square off his position, either it is long or short, as this counter will not be traded for BLESS for the forthcoming session, explained the brokers.

This provision itself defeats the purpose of carry forward of trades, with which it was introduced, they said.

Another drawback is computation of margins. While shifting from MCFS to BLESS, the BSE had claimed that all the margins and their way of computation will remain same and accordingly the risk containment measures would be imposed.

BSE, in its circular to members dated January 18, said that all members will be required to pay gross exposure margin on daily basis which would be computed on the basis of their scripwise outstanding cumulative of net purchases plus net sales including scrips in no-delivery period.

The exchange has also changed the method of computing gross exposure margin (GEM). Member with a gross exposure of less than Rs 1 crore are not required to pay GEM while those between Rs 1 crore and Rs 5 crore will have to pay 7.5 per cent of excess over Rs 1 crore as GEM.

Brokers, whose gross exposure is above Rs 5 crore and up to Rs 10 crore, have to pay Rs 30 lakh plus 10 per cent in excess of Rs 5 crore as GEM. Exposure between Rs 10 crore and Rs 15 crore will attract the GEM of Rs 80 lakh plus 12.5 per cent in excess of Rs 10 crore. Exposure above Rs 15 crore and up to Rs 20 crore will attract GEM of Rs 1.425 crore plus 15 per cent in excess of Rs 15 crore.

Exposure above Rs 20 crore and up to Rs 100 crore will attract GEM of Rs 2.175 crore plus 20 per cent in excess of Rs 20 crore while that above Rs 100 crore will attract GEM of Rs 18.175 crore plus 25 per cent in excess of Rs 100 crore, the circular says.

However, the BSE president does not agree to brokers views, he says there may be some brokers who must have bore the brunt but overall the margin computation and their collection under the BLESS has remained almost stable.