Mumbai, Oct 29: Bombay Stock Exchange President Anand Rathi has clarified that the rationalised system of margining would be beneficial to the memebers contrary to the perception that it has resulted in higher margins. ``In fact, the new system provides flexibility to the members as people get the benefit of unutilised money.''A large number of small operators who had joined the rally are believed to have been thrown off guard following the introduction of the rationalised system of margins. Incidentally, since the introduction of the new system of margining from October 25 on the BSE, the Sensex has seen a sharp fall of around 400 points.
BSE officials continued to maintain that the new system was beneficial to the members as it provided much better cushioning and they also denied that any terminal has been deactivated. ``Not a single terminal has been deactivated as of now,'' said a senior BSE official, though market sources said that on Thursday 180 terminals had been shut off by the exchange.
Essentially, the rationalised system allows a member to utilise excess additional capital with the exchange to meet margin requirement. The excess additional capital is arrived at after meeting the gross exposure requirement.
A BSE official explained that many brokers interpreted the new system to mean that the excess additional capital could be used for purpose of calculating gross exposure. But the excess capital was meant for the purpose of margins and not for gross exposure, he added.
The new margining system was announced by Sebi in July. The BSE introduced it early this week after getting the software ready for calculating the margins. However, the National Stock Exchange had introduced the new system sometime in August, which saw similar confusion for a few days leading to shutting down of terminals. However, the dust over the introduction of new margins settled down on the NSE after a few days.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.