Sebi defers carry-forward decision to
May 14
The Securities and Exchange Board of India board has deferred the decision on a proposal to abolish carry-forward trading, a senior official of the agency said on Saturday.
The capital markets regulator will now decide on the issue on May 14.
"The meeting has been deferred to May 14, since two of the six board members could not make it (to Saturday's meeting)," said D R Mehta, chairman of Sebi.
He said since it was an important issue, the decision should be taken in the presence of all members.
Sebi also cancelled the previously announced meeting with the media.
The agency had earlier said its board was meeting on Saturday and the agenda contained amongst other things, a discussion on the proposal to ban carry-forward trading.
The finance ministry representative Rakesh Mohan, who is an advisor to the Union finance minister, and Aditya Birla group chairman Kumarmangalam Birla, did not attend the meeting leading to deferment of the crucial decisions, Sebi chairman D R Mehta said.
"Such important decisions cannot be taken without a full quorum and will now be discussed at the next board meeting scheduled on May 14," Mehta told reporters.
The Sebi-constituted group, headed by full member J R Varma, had last week recommended that deferral products approved by the regulator would cease to be available from July two, leading to a sharp drop in the Sensex as brokers expressed disappointment over the suggestion.
The rolling settlement is to be introduced on stock exchanges on July 2.
The group recommended that automated lending and borrowing mechanism - ALBM --, borrowing & lending of securities scheme - BLESS --, modified carryforward system and continuous net settlement - CNS -- would cease to function from that date.
On Friday, Mehta had held a meeting with Sinha to discuss the recommendations of Verma committee in Delhi.
A risk management panel set up by Sebi suggested the ban on carry-forward trading on April 26. The following day the Bombay Stock Exchange benchmark Sensex fell nearly 4 per cent due to concern the ban would stifle trading activity.
Carry-forward trading allows investors to carry over from one account period to the next, contracts involving shares bought on margin.
It increases leverage in the market, or the extent of trading financed on credit. By doing so, it increases trading volume and market liquidity, but also volatility.
Sebi is under pressure to reduce market volatility after Indian stocks plummeted in March and the first half of April. The Bombay Stock Exchange's 30-stock Sensex fell 29.4 per cent over a six-week period to April 16.
Indian stock markets rallied earlier this week on hopes the practice would be gradually phased out.
The Sebi panel proposed carry-forward trading be banned completely from July 2, when Indian markets adopt a rolling settlement system.
All trades will be required to be closed at the end of each day, and paid for five trading days later.
Additional inputs: PTI
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