• PAGE ONE
• INDEX
• HOME

Indo Shares declared defaulter by BSE

Ashok Jainani

MUMBAI, July 10

THE Bombay Stock Exchange (BSE) last week declared its member, Indo Shares & Fintrade Pvt. Ltd (formerly a proprietary firm known as Jasmin B. Shah), a defaulter for non-fulfillment of its obligations pertaining to short delivery of large quantity of sha res of Vakrangee Softwares Ltd (VSL).

However, BSE did not announce it and the broker obtained a stay on July 7 on the grounds that BSE did not grant sufficient time to make the payments.

According to sources, the broker continued to default on the exchange consistently for over ten settlements in a compulsory demat scrip in rolling settlements from DR-53 to DR-63.

For sales effected from DR-53, the broker ought to have delivered shares during pay-in on June 20. The broker's net short positions in VSL shares were continuously auctioned or closed out till June 30.

It is unclear whether BSE's online surveillance system (BOSS) gave enough advance indications of the impending danger or the exchange administration ignored it. The BSE President, Mr. Anand Rathi, did not want to elaborate on the issue but he told Busine ss Line that the exchange authorities were trying to further tighten the systems to prevent recurrence.

In order to reduce risk and resultant exposure, the broker's trader workstation (terminal) was shut off by the BSE on June 28 when it became quite clear that the broker had short sold a large quantity aggregating about 4.5 lakh shares valued at over Rs. 6.75 crores based on last price, or about 6.5 per cent of the company's equity capital.

This is in addition to sale by the same broker of 1.5 lakh VSL shares which have been returned by the company as bad delivery due to a court injunction. In a parallel move on June 28, BSE also suspended trading in shares of VSL which was lifted on July 3 on strong protests from investors.

The broker, due to his short sales, owes over Rs. 4.3 crores to the BSE, reliable sources said. After adjusting for receivables and invoking bank guarantees and other security margins, the broker's net outstandings due to the exchange work out to over R s. 2.95 crores which includes about Rs. 70 lakhs towards short sales and Rs. 2.2 crores towards rectification of bad delivery of 1.5 lakh shares, senior BSE officials said.

The move also brings out into the open that

brokers can create trouble even in the rolling settlement, a system introduced mainly to curb speculative spirit and induce delivery-based trading. To make good the loss arising out of bad delivery of original sale of 1.5 lakh shares, the broker is said to have short sold further in order to bring down the stock price.