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Sebi issues fresh guidelines to restore normalcy on bourses

In the wake of stock market crash and payment crises, the Securities and Exchange Board of India (Sebi) on Sunday came out with a set of new guidelines to control the bourses and ensure that payments are settled immediately and investors get their money without any delay.

Under the guidelines coming in the wake of two successive Black Friday crashes after the Union Budget, banks will be allowed to provide collateralised funding in the automated lending borrowing mechanism (ALBM) and Borrowing and Lending of Securities System (BLESS) facilities of the stock exchanges where these facilities are guaranteed by the trade and settlement funds of the stock exchange, or clearing corporation.

Sebi increased the additional margin "end of the day" net outstanding sale position of all scrips in ALBM, BLESS and carry forward systems, to 25 per cent from the 10 per cent introduced temporarily on March 5.

The gross exposure limit for the member of the stock exchanges is being reduced to 10 times of the base capital and the additional base capital for NSE.

In case of other exchanges, the limit would be reduced to 15 times from March 12, the Sebi said on its Web site.

The broker outstanding position other than those in BSE and NSE shall not exceed Rs 500 million. The two major bourses have been excluded in view of the Trade and Settlement Funds.

In the case of BSE and NSE, the existing trade guarantee funds would henceforth provide counter-party guarantee for all the transactions which take place in the exchanges and meet the payment obligations of the brokers immediately without waiting to declare them as defaulters, the SEBI said.

"This means that the settlement (pay-in-pay-out) is effected immediately and investors get their money without delay," it said.

As regards the Securities Lending Scheme, Sebi said henceforth the scheme would be applicable only to the transactions under ALBM and BLESS facilities.

The securities that have been already borrowed under the scheme other than ALBM and BLESS shall have to be returned to the authorised intermediaries latest by the close of business of March 15, 2001, it added.

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