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March 17, 2001
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Money > Business Headlines > Report March 17, 2001 |
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Bank, FI share sale nullified
BS Banking Bureau The Calcutta Stock Exchange (CSE) is reported to have nullified sale of shares by banks and institutions, claiming in a few cases these transactions are 'accomodating transactions'. Banks are facing the problem of liquidating shares held by them as collateral for advances to brokers. Banks sell these shares through a clutch of brokers and if the buyer of the shares happens to be the same broker, then the exchange is taking the view that such a sale is an 'accomodating transaction' and in turn nullifies the sale. However there is a grouse that at this point of time even the genuine investors are being affected. In case the broker through whom banks have sold the shares has defaulted, the CSE is confiscating these shares. Market sources said the exchange is taking the view that such transactions reduce the pay-in liabilities of the brokers in question. A broker with an outstanding purchase position has a pay-in liability at the end of settlement, but if a sale transaction is routed through the same broker, his liability stands reduced. Sources also said that the continuing saga of invoking bank guarantees could mean that the pay-ins on the exchange has not been completed and it is still going through. According to sources as the exchange negates these so called 'accomodating transactions' the liability of the exchange at the time of pay-out would be lower. A host of banks and financial institutions have been affected because of this. These 'accomodating transactions' are sometimes done when some of the clearing house institutions advance money to brokers ahead of the official pay-out to help them tide over liquidity problems at pay-in. These institutions usually give a post-dated cheque which brokers can discount with their own banks or even pay up-front.
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