Mumbai, Jan 4: The Bombay Stock Exchange (BSE) will become the second bourse in the country to begin securities lending and borrowing activities. BSE president Anand Rathi on Thursday formally announced the launching of a new Borrowing and Lending Securities Scheme (BLESS) from January 22, 2001. While formally announcing this at a press conference Mr Rathi said that the exchange has introduced this new system with a view to promote securities lending and borrowing activities and to provide a commercially competitive product. The exchange have already received the approval from the securities market regulator Securities and Exchange Board of India (Sebi).The only difference between the BLESS and the modified carry forward system (MCFS) would be that in the new system the badla financier would actually get the delivery of the shares which were lying with clearing house in case of MCFS, MR Rathi said and added that the BLESS would be identical to the traditional badla system and it will also be similar to the ALBM system of NSE.
Mr Rathi said that with the introduction of BLESS, the existing MFCS would cease to exist and the new system would enable borrower of the securities to withdraw the shares subject to payment of appropriate margins and risk management measures, he added.
He also said that besides providing the stock lending and borrowing facility to the member brokers and their clients, BLESS would also serve the purpose of deferral of settlement (carry forward). With this scheme in place, members can carry forward their positions of normal settlement by receiving or paying securities lending and borrowing charges.
Daily rolling badla will also be shifted to BLESS once the back offices of the brokers are ready with the required software changes, he said.
Mr Rathi said that mode of margin payment and other issues will remain same as they were in MCFS. In BLESS also, members will be allowed to pay 50 per cent of carry forward margins in the form of fixed deposit, he added.
BSE vice-president Deena Mehta said that we want level playing field for our member brokers as far as this segment of trade is concerned. At BSE, members have to pay carry forward margin to carry forward their positions in next settlement while in case of NSE members it does not have the botheration of paying such margins to carry forward their ALBM positions, she added.
According to brokers, absence of margins is the sole factor responsible for spurt in ALBM volumes as compared to that of BSE's carry forward (Badla) system. The combined carry forward volumes in value terms have crossed Rs 6,000 crore and ALBM's share is close to 60 per cent, they added. Ms Mehta, however, denied that market regulator's move to curb the naked sales (short sales) is linked to BSE's proposal to introduce BLESS. She said that short sales are as necessary for the market as the long positions are.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
