SEBI bans carry forward, to introduce options on new scrips

By Our Special Correspondent

MUMBAI, MAY 14. The Securities and Exchange Board of India (SEBI) today decided to ban the age-old carry forward (badla) system and introduce options on individual scrips from July 2. This will coincide with the commencement of rolling settlement.

All deferral products, namely, automated lending and borrowing mechanism (ALBM), borrowing and lending of securities scheme (BLESS), modified carry forward system (MCFS) and continuous net system (CNS) would be discontinued form July 2 as proposed by the Prof. J. R. Varma committee report.

Responding to the media after the board meeting, SEBI chairman, Mr. D. R. Mehta, said transitional mechanism was being put in place in order to give the market adequate time for orderly unwinding of positions. Accordingly all outstanding deferred positions in the current settlement would be compulsorily liquidated by September 3. Any additional deferred positions taken on or before May 15 would have to be compulsorily liquidated by July 2.

Mr. Mehta said the exchanges should be required to monitor the positions of the members, announce plan for phased liquidation of positions between July 2 to September 3 and ensure that this schedule was adhered to.

The SEBI chairman said permission would be granted for introduction of options on individual scrips from July 2. Index futures had already been introduced and permission had been given to exchanges to introduce index options. Introduction of other derivative products would be considered later.

The rolling settlement would be applicable to 414 scrips from July 2. The remaining stocks would be brought under the rolling settlement with effect from January 2, 2002. In the interim period, that is, between July 2, 2001 and January 2, 2002, stocks which will not be under compulsory rolling settlement will be traded on uniform settlement cycle - Monday to Friday - with effect from July 2 on all exchanges.

There will be no price bands (circuit filters) on individual stocks from July 2 in rolling settlement. The SEBI will shortly announce a scheme for implementing market wide index based circuit breakers.

The recommendations of the Group on Insider Trading set up by regulator were also approved by the SEBI board today. The recommendations are in three parts: creation of preventive framework consisting of internal procedure and code of conduct for listed companies and other entities associated with securities market, creation of a code of corporate disclosure practices for listed companies.

Thirdly, the group also recommended some amendments in the existing provisions so as to strengthen the insider trading regulations. The SEBI would notify the insider trading code in a span of two to three weeks.

Send this article to Friends by E-Mail

Section  : Business
Previous : Bullion rates
Next     : Samsung to invest $50m in India