MUMBAI, APR 17: The Bombay Stock Exchange is prepared to relax the circuit breaker mechanism on stock prices. "We are of the view that the limits need to be relaxed and the Securities and Exchange Board of India agrees with our view. It is just that the timing has to be decided," BSE president Anand Rathi said. Currently shares quoting above Rs 20 cannot move more than eight per cent either upward or downward on a single day. But Rathi said he was not in favour of the relaxation being done in the current market scenario. "Now it will create more panic, so it has to be done later," he said. SEBI had said in January that it would allow exchanges to relax the eight per cent share price movement limit by a further four per cent, thirty minutes after the eight percent limit is reached, in a phased manner. But that has not yet been implemented. With volatility rising sharply in the last few sessions, share markets found trade virtually paralysed in the first few minutes as market favourites hit a circuit breaker limit. The circuit breaker limit prevents any rise or fall in a share beyond eight percent for the rest of the day. They can trade within that threshold, but that has rarely happened in falling markets where everyone is trying to get out. On Monday, the circuit limit meant that after the first few minutes of the session there was no trading in the country's hottest software stocks. Infosys Technologies, NIIT and Satyam Computer Services were all down eight per cent at Rs 8,521.25, Rs 1,974.80 and Rs 3,758.90 respectively. In a meeting between stock exchanges and Sebi earlier this month, the exchange chiefs had expressed reservations about any relaxation in the circuit levels in the prevailing volatile conditions. Rathi said that with the necessary software in place to accomodate the modifications they could also introduce a `8+4+4' for those scrips which hit the circuit breaker. When specifically asked as to what sort of `stability' the regulators were looking at before relaxing the circuits, the BSE chief said that it was upto Sebi to decide and they could effect it even in current market conditions. The problem with the eight per cent limit is that as soon as the price of any particular scrip touches the limit, trading in it gets effectively suspended and investors are unable to enter or exit ther counter. It can also be used as a tool for manipulation. The relaxations are essential in this scenario - but the apprehension is that the four per cent relief may not be sufficient to accomodate it and hence the `8+4+4' format as opposed to the initially approved 8+4 model. In fact earlier BSE had actually mooted a 10+5+5 model which did not find favour with Sebi. Rathi also said that the margining system had to be suitably restructured between very low rates - which put the market at risk - and too high rates - which raised the cost of transactions.
