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Brokers feel the delay in the implementation of interoperability between stock exchanges and clearing corporations (CC) — a reform meant to cut down massive trading costs — could hurt them.
Interoperability was to start from Monday but the NSE CC issued a circular on the evening of Friday, May 31, saying it will be status quo for now. “Existing operational procedures including file nomenclatures of reports, functionality of client/CP code modification, risk parameter files, CP code confirmations, will continue to be applicable till further notice,” it said.
NSE said its Friday circular was in continuation of an April 27 one, giving guidelines on interoperability in the equity and currency clearing segments of the capital market. SEBI had allowed interoperability in November 2018 and directed it to be made operational before June 2019. Exchanges issued guidelines only on April 27 and gave brokers a month to prepare.
‘A nightmare’
“Markets eagerly await the implementation of interoperability. Many had already applied to the designated CC for migrating on June 3 and had moved their collateral in anticipation. Let’s see what happens to these members on Monday,” said Uttam Bagri, Chairman, BSE Brokers Forum.
“It is a nightmare, as NSE, on Friday evening, announced that interoperability will be delayed. Clients had arranged for margin money to be shifted from one CC to another. On Monday, when a client wants to trade on BSE, he will have no margin there as it was shifted to NSE CC and banking transactions could not happen on Saturday,” said a member of the NSE brokers’ association.
Brokers intend to shift all margin money, including cash, assets and bank guarantees, to a single CC once interoperability kicks in. Banking involves paper work and cost and those who have already migrated from one CC to another are worried about Monday’s session.
NSE did not comment to an email query. A source close to the developments said the exchange just wanted all its members to be better prepared, and hence the delay, but interoperability will be fully implemented from July.
In layman’s term, once interoperability is implemented, a separate margin to trade on NSE and BSE will not be required. It will allow trade orders to be executed on the platform that gives best ‘spread’ without dual margin. It will ensure a level playing field between exchanges as those with better trading technology may gain in cut-throat volumes game, experts say.
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