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Thursday, Jan 08, 2004

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Brokers hail SEBI move

Virendra Verma

Mumbai , Jan. 7

STOCKBROKERS today welcomed the SEBI decision to introduce revised margin trading and securities lending and borrowing system. However, they said margin money of 50 per cent for margin trading was too high for their clients.

Officials at leading broking firms said the revised system is better than the previous one, but doubted whether there will be takers for funds with margin of 50 per cent.

Their argument is that several broking firms, through their associate firms, are giving funds with margin ranging between 20 and 30 per cent and these clients will not come to take funds with 50 per cent margin.

But officials at medium sized broking firms said that with SEBI officially allowing margin trading, it would curb the unofficial market. "Clients that are willing to buy 1000-2000 shares would be benefited with the SEBI decision," said an official of a medium sized broking firm. However, he said that the margin of 50 per cent was high.

He said the margin trading will be available only for around 125-150 stocks and out of this derivatives trading in 53 stocks already exists and the margin in stock futures is less than 50 per cent thus making margin trading unattractive in stocks in which derivatives trading is allowed.

But a derivatives analyst said investors taking position in the derivatives market will not come for margin trading and vice-versa as a single contract size for derivatives is very high and outflow of funds is also high for taking position in derivatives market.

But most of the brokers welcomed the SEBI move to introduce securities lending and borrowing system as it will open doors for every investor to borrow and lend shares.

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