May 22, 2000

ALBEM = BADLA?

All the major stock exchanges have serious problems with the National Stock
Exchange's Advanced Lending and Borrowing Mechanism (ALBEM). They alleges that the ALBEM is akin to badla at lower margins and that it permits naked short sales which SEBI has proposed to ban.Interestingly, the ALBEM has been around for several months but nobody ever protested because volumers had languished at Rs.4 crore or so. It only turned controversial when volumes jumped to Rs. 400 crore and continue to grow. The bourses also realised that while badla was restricted to a mere 140 securities the ALBEM facility is open tp all NSE shares. NSE 's daily volumes have also grown with the popularity of the ALBEM, but badla rates are down. Further, a big business house has switched to the NSE's ALBEM instead of the BSE's badla and that really upsets the Bombay and Calcutta exchanges. But the main reason for the stridency of the protests may be entirely different. The Exchanges are far more agitated at SEBI's ban on naked short sales form May 31 than about the ALBEM. The ban is expected tokill the thrill of short selling and the bourses do not like it. Protesting the ALBEM and equating it toeasier badla gives them leverage to renegotiate the ban. Will SEBI fall for the noise being made about ALBEM or will it stick to its stand?

Trading thin
Now that L.K.Singhvi, Senior Executive Directors at SEBI has announced his
intention to look closely at the manipulation of stocks with low trading volumes,
brokers are busy indentifying scrips which could get into trouble. Top of the
list is SKumars.com which has the strangest possible trading pattern. SKumars
recently made news for its pune route to listing on the Bombay Stock Exchange,
but look at how the stock has behaved since then. On April 10 - its first day
at the BSE - it was Rs 475 with a huge volumes of 89000 volumes on day two were also 60,000 thought the thought in the prices had already begun. Within days however, volumes dwindled to around 1000 to 1200 shares on good days on three occasions a mere 100 shares were traded and at others the volume was between 200 to 500 shares. The price dwindled to Rs98. Last Thursday trades shot up again and touched 49800 and the share closed at Rs. 103. Is this how SEBI has ensured that trading is not manipulated due to thin trading? Skumar is not the only one there are other too. Most are in the favoured IT, Media, entertainment segment which has seen dilution of IOP rules to allow companies to go public with a mere 10 per cent offer.

500 Point Swing
Here is another one for Singhvi. Maybe he should look closely at what happened
the day the Sensex swung nearly 500 points during a single session ( nearly
200down and over 300 up). A top broker says his dealears were working the telphones calling various Funds (perticularly a large Fund) to buy shares which looked good when prices hit the lower circuit filter (12 percent drop in values). They refused to touch them. Half way through the session the ramping operation began and the stocks moved smartly upwards without even the cover of a positive rumor. When they neared the upper circuit this reputed Fund suddenly turned hyper active and placed generous buying orders all round. In effect the fund gave some operators up to a cool 24% profit on few scrips in one trading day. Did any one mention fiduciary responsibilities? This is by no means the only fund playing the speculators game the difference is that unlike others fund playing the speculators game the difference is that unlike others Fund Managers are forced to worry about negative Net Asset Values this one probably has reason to be confident that government or the regulatory will not trouble has reason to be confident that government or the regulator will not trouble it. The issue is that if SEBI cannot touch this Fund why bother with others?

Show-cause Satyam
Satyam may be a hot stock with investors, but the NSE find it lethargic when
it comes to redressing investor grievances. Having chased it to resolve the
30 complaints against it, of which nearly half have been pending for over six
months the exchange has sent it a show cause notice. If Satyam fails to resolve
the complaints them it share are probably in for a suspension.

 

Updated weekly.

The author's e-mail address is: suchetadalal@yahoo.com

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