Cash therapy for payment paralysis
Lyons Range not out of the woods yet
Watch out for the mobile

 
 
CASH THERAPY FOR PAYMENT PARALYSIS 
 
 
FROM OUR CORRESPONDENT
 
Mumbai, March 11: 
The Securities and Exchange Board of India (Sebi) today announced a series of measures to shore up the payments position on bourses and inject confidence into a flagging market.

The most important move is to give bulls, which have been lying low as a liquidity crisis stalked bourses, a new lease of life by allowing collateralised bank funding in NSE’s automated lending and borrowing mechanism (ALBM) and BSE’s borrowing and lending securities scheme (BLESS).

The market regulator has tightened further the screws on short sellers and sought to rein in errant stock exchanges such as Calcutta Stock Exchange (CSE) by placing a cap on broker-wise outstanding positions.

Drawing lessons from the problems that surfaced at Lyons Range, exchanges have been told not wait for a payment crisis to worsen, but to immediately release funds from trade guarantee funds.

As a temporary measure, Sebi said banks will be allowed to provide collateralised funding in ALBM and BLESS facilities provided deals are guaranteed by trade and settlement funds of stock exchanges or clearing corporations.

The measures come after Saturday’s meeting between Reserve Bank governor Bimal Jalan and Sebi chief D R Mehta where the crisis in the markets, the plunge in indices and the erosion in the value of shares held by banks as collateral were discussed.

Stock exchanges have been asked to use their own trade guarantee funds to provide counter-party guarantees to all transactions and meet payment obligations on behalf of brokers immediately without waiting to declare them defaulters.

The move, Sebi says, will ensure that settlements (pay-in and pay-out) are squared off immediately and investors get their money without delays. NSE’s National Securities Clearing Corporation has a similar system in place, and it is widely used abroad.

Short sellers will not have it easy: Stock lending will be limited to deals under ALBM and BLESS. Shares already borrowed under schemes other than the two listed above will have to be returned to authorised intermediaries by March 15.

The additional margin on daily net outstanding sale positions on all scrips in the modified carry-forward system (MCFS)/ALBM and BLESS is being increased to 25 per cent from 10 per cent.

In addition, broker-wise end-of-the-day outstanding position (aggregate of all securities) on bourses other than the BSE/NSE shall not exceed Rs 50 crore from March 12.

The two premier exchanges have been kept out ‘in view of the size of their trade and settlement guarantee funds’.

Starting March 12, the gross exposure limit for the members of exchanges is being reduced to 10 times their base capital and the additional base capital for NSE, and 15 times for others.

Sebi in touch with govt

The Sebi chief is believed to have briefed the finance ministry top-brass today about the situation in the capital markets and measures taken to restore stability on bourses, which were shaken by the CSE payment crisis on Friday, says PTI.

The market regulator had constituted a 40-member committee to probe the slump two days after the budget announcement, allegedly by a bear cartel involving foreign institutional investors and brokers. A report is expected soon.

   

 
 
LYONS RANGE NOT OUT OF THE WOODS YET 
 
 
BY PALLAB BHATTACHARYA
 
Calcutta, March 11: 
The Calcutta Stock Exchange is heading for a double whammy — another major payment crisis is waiting to erupt next week, as badla rates soar on shortage of funds for market operators.

A CSE board member said badla rates have shot up to over 40 per cent, from the usual rate of around 14 per cent.

“Banks and financial institutions are now playing it safe to avoid any kind of ‘mis-interpretation’ of their operations, particularly before the year-end accounts finalisation. The brokers are now desperately looking for alternate financing even at the cost of much higher interest rates,” he said.

Although the payment shortfall has been resolved, at least in the official circuit, for the last settlement period ending March 1, payment obligations of a few brokers range between Rs 300-500 crore in the unofficial market.

“The crisis outside the exchange is bound to have a cascading effect on the market when it opens on Monday,” a senior broker said.

He also pointed out that most major scrips, including the tech bigwigs, may have to bear the brunt of the impending crisis. What is more important, everybody in the market will prefer to take a cautious stand when it comes to creating new positions on certain scrips. Hence, the volume of trade is also likely to dip, he added.

Sources said an even a bigger crisis is waiting to erupt for the settlement ended March 8, clearing of which is scheduled on March 15, as the decline in share values was much more during that settlement.

Thus, while on one hand, the payment crisis outside the ambit of CSE is yet to be resolved, on the other, jacked-up badla rates are hitting concerned brokers hard.

Under these circumstances, it will be difficult for them to meet their entire liabilities on the clearing date. However, senior market operators refused to speculate on the tentative shortfall that may arise during the next clearing.

“It is difficult to make out the prospective shortfall now. That could probably be figured out on Wednesday,” an insider said.

CSE, though, is unfazed at the prospect of another round of payment crisis.

“We think the crisis could be resolved latest by Tuesday. Even in the worst case, the exchange can complete the pay-out process with the help of the Trade Guarantee Fund which has a corpus of Rs 600 crore,” a senior CSE official said.

Meanwhile, top CSE brokers, held several rounds of meetings since Saturday morning to resolve the crisis.

   

 
 
WATCH OUT FOR THE MOBILE 
 
 
FROM M. RAJENDRAN
 
New Delhi, March 11: 
There’s good news for those down with the exam blues: help is close at hand, in fact, on your hand itself. What’s more, it won’t invite dirty looks from the invigilator and will have your friends drooling.

The mobile phone is now set to adorn your wrist and never mind the heartburn to the humble wrist watch.

WAP-enabled and hands-free versions later, it’s now time for the watchphone to take the mobile phone market by storm. The watchphone promises to be a phone, wristwatch and a calculator all rolled into one.

Korean consumer electronics major Samsung is poised to introduce the ‘WP’ or watchphone in the Indian market, by the year-end or early next year.

This is the first product developed by the company as part of its focus on capturing niche segments of the mobile phone market.

“The WP is a product developed as part of a market segmentation strategy designed to respond to the nearly saturated market for wireless handsets. It is a compact, futuristic wrist-worn communicator,” said a company executive.

Not that the makers of the phone intend it to be used to fox the examiner. The watchphone is essentially targeted at Generation N — defined as those between 10-20 years of age, and Generation X — those in their late 20s and early 30s, with a strong preference for the ‘lightest’ devices.

“It can be misused, so are most of the products. Worldwide too, it has been introduced in a limited way, but price remains a prohibiting factor. Pricing will determine the success of this product,” said a senior Nokia executive.

Samsung executives had only enigmatic smiles to offer when quizzed about price. However, industry sources expect it to be priced between Rs 30,000-Rs 50,000.

The watchphone will also perform the functions of an information management system.It combines the utilities of a personal digital assistant (PDA), calendar, to-do list, countdown, phone book and PC synchronisation.

Its compact design, based on a high-tech futuristic concept which combines other normal phone features like speakerphone, over-the-air service, data capability and voice dialling 20 locations (voice command). The phone, with dimensions of 67x58.5x20.5mm, weighs less than 50 grams.

   
 

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