BSE slaps 15% additional carry-forward margins

MUMBAI, Aug 31: In a bid to bring down volatility on the stock markets, the Bombay Stock Exchange (BSE) has decided to impose additional ...

MUMBAI, Aug 31: In a bid to bring down volatility on the stock markets, the Bombay Stock Exchange (BSE) has decided to impose additional carryforward margin of 15 per cent if the gross outstanding position in a scrip exceeds Rs 200 crore or the net outstanding position exceeds Rs 150 crore.

This margin comes a day after SEBI alerted the exchanges about the volatility. Currently, the exchange imposes additional carry-forward margin of five per cent if the gross outstanding exceeds Rs 100 crore or the net poisition exceeds Rs 80 crore. The rate is 10 per cent if the gross and net positions exceed Rs 140 crore and Rs 100 crore respectively.

The new slab of 15 per cent will be applicable on positions carried forward from settlement ending September 10 to the settlement commencing September 14. Though the net outstanding position on Tuesday on the BSE was Rs 2,500 crore, the new margin slab will not affect the market as it will come into effect from next week.

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Besides, the exchange has also reduced theintra-settlement scrip-wise limit for a member from the existing Rs 7.5 crore to Rs 6 crore with effect from September 6. It has also reduced the inter-settlement scrip-wise carryforward limit from Rs 5 crore to Rs 4 crore for the position carried forward from September 10.

These measures have been taken in view of the recen volatility in share prices and build-up of large positions in certain scrips, the BSE said in a statement.

Meanwhile, the G P Gupta committee appointed by the Securities and Exchange Board of India (SEBI) today submitted its draft recommendations suggesting market making in specific shares satisfying an eligibility criteria.

The panel’s four-point eligibility criteria excluded the BSE Sensex shares and the S&P CNX Nifty stocks of the NSE, shares where the average number of trades is more than 50, shares where the value of trade on a daily basis is more than Rs 10 lakh and shares of a company not in operation and the networth erosion is beyond 50 per cent.

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The panel suggested themarket making activity, which would be voluntary in nature, should provide two way quotes in the shares at regular intervals of thirty minutes with minimum depth of Rs 5,000 or one market lot which ever is higher, within five days of registration, the Sebi said in a statement.

In the case of demat shares, for which there is no market lot, the same market lot as existed in the physical segment would be applicable for this purpose, it added. The member broker, who was allowed to act as market maker, would have to compete with other market makers in an exchange, for which maximum number of market makers should not exceed five per exchange, the panel said adding they should operate in a quote driven system.

The registration of the market maker should be cancelled if he/she failed to provide two way quotes for more than three consecutive days, it suggested. The panel felt that introduction of market making could help investors by giving them assurance of liquidity and asked the Sebi to work out the detailedprocedure.