Different STROKES

Money trouble

The capital market regulator too is badly hit by the economic slowdown. The handsome fee income which the regulator earned has dwindled enormously. Market intermediaries are opting out of registration by the droves. This means less income for the regulator which has set up a fairly high cost establishment. Expenses such as unlimited celltel calls even long distance,frequent foreign travel, hefty per diem etc. are forcing the regulator to get tough on fee collection. Last week SEBI issued a letter threatening to charge brokers 15 per cent interest if payment of registration fee is delayed. It also refused to clear transfer of membership cards, unless fees were all paid up. Is it any wonder then that the regulator probably wants the capital market revived as much as the finance ministry and the brokers do.

Cash flow hassles

While on money trouble, the BSE8217;s ambitious plans to set up a rival depository is going to be a big squeeze on its members. The BSE functioned on interest earned on its reserves. But with Rs 60 crore transferred to a broker contingency fund last year and another Rs 65 crore set for transfer to the depository, the BSE has to find new sources of funds in a hurry. It has decided to raise Rs 10 crore by increasing brokers fees and another Rs 14 crore increase by upping VSAT charges which are coughed up by members. But business is so bad thatthe exchange has not yet announced the increase even though half the year is already over. Only three weeks ago a leading broker was beaten up by his employees because he had not paid them for several months. Will they pay higher fees? No way, say some brokers. Instead, they hope that SEBI will clear the depository bylaws and that bring in institutional investors to make up the networth.

Clearing muddle

In fact, the BSE has found three investors to help it meet SEBI8217;s Rs 100 crore net worth requirement. The catch is that all three expect to be made clearing banks for the bourse. HDFC Bank, which plans to invest Rs 5 crore, more or less expects to be made clearing bank and recover its investment within a couple of years. Bank of India, the BSE8217;s original partner has a board resolution which says that it will invest Rs 20 crore if it is the exclusive clearing bank and half the amount if clearing is shared. Bank of Baroda too expects to be made a clearing bank if it invests. The question is, ifall three want clearing bank status in order to invest in the depository will there be enough business to go around? And what will it offer other investors who will still have to be brought in to make up the investment?

Kept above par

The Finance Minister has put the Deepak Parekh committee in a real jam. He not only announced that Unit 64 is not driven by its asset value, but that the still secret NAV is not below par. The Parekh committee, we hear, is finding to its horror that the losses on debt investment may be worse that those in debt instruments. One way for the committee to avoid making the finance minister look foolish will be to make its recommendations without going into the state-of-affairs at UTI. But will that not make the committee look foolish? We are waiting to see how the savvy Mr Parekh handles this one.