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The National Stock Exchange (NSE) Brokers’ association ANMI has sought a complete lockdown of stocks markets.
ANMI says that it had requested SEBI to ask State governments to declare stock market broking houses as essential services, which SEBI has not done. Therefore, they are now seeking a complete closure of the markets as brokers are not able to open their offices and staff are facing problems in reaching.
“ANMI’s made a submission to SEBI to issue advisory to State governments to include “stock broking and depository services” as essential services and inform all State governments to issue necessary guidelines to that effect. In this regard, to the best of our knowledge, SEBI has not issued any advisory / circular in this matter. Except State Governments of Maharashtra, Gujrat and Rajasthan, no other State has declared “stock broking and depository services” as essential services. ANMI members and their staff are facing huge problem to reach their head office to operationalise their central server, back office functions, risk management and depository services to meet the requirements of their clients and compliance of exchanges/ SEBI.
“In many cases, members have reported that even their skeleton staff could not reach their head offices, in Delhi, Haryana, Uttar Pradesh, West Bengal, Tamil Nadu, Karnataka, etc., on account of complete lockdown declared by the respective States. In fact, curfew has been imposed in Punjab,” ANMI said in its letter to SEBI.
According to Rajeev Agarwal, former Whole Time Member SEBI, the markets may be closed. "Markets normally should not be closed. However in the present situation, markets may be closed for a few days. When the supporting infrastructure is crippled because of poor city mobility thanks to lockdowns across the country and markets are not able to function efficiently in the absence of adequate information about spread of Covid, its impact on economies and the impact the daily relief packages and monetary policy measures being announced across the world are going to have on global situation, it’s better to consider closure of markets for few days to make them digest all negative and positive information and resume price discovery. There are many unknowns in the markets at present and the markets are suffering from fear of unknown. This is causing extreme volitality in the markets. The open markets with this kind of volatility may lead a large number of brokers to default. These are extraordinary situations requiring extraordinary measures. No doubt the regulator will have to consider the downside of closing the markets too and take a balanced view.” said Agarwal.
Commodity market
For commodity market brokers, there is added trouble as commodity market trading in India goes up to 11.50 on mid-night. They have staff in double shift to punch trades. Another problem for this segment of traders is that physical commodity markets, including agri and bullion, are completely closed, which is leading to chaos in effective price discovery as futures trades are mainly speculation.
All most all States have announced a complete lockdown even of public transport. However, are no explicit guidelines/notifications have been issued by these State governments exempting capital markets/stock brokers’ offices from the total lockdown,” a letter from ANMI to SEBI said. In Mumbai, clarifications were issued to authorities to exempt employees working in exchanges and broking offices from the lockdown. No such clarifications/guidelines have been being issued by other State governments, ANMI said.
ANMI further said that all financial markets are integrated globally, and India is among the top seven markets globally in equity volumes. Hence, equity and derivative markets cannot be shut down while global exchanges/financial markets are actively operating.
SEBI and the exchanges have permitted trading via terminals from various locations in the country. Though up to 50 per cent of the front office staff of broking offices have been allowed to work from home, such a facility cannot be extended to back office staff and those looking after servers and operational affairs. Thus, it is imperative to declare capital markets/ stock broking services as essential services exempted from the lockdown, the letter said.
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