NSE/BSE say trading back to normal, but brokers still report confusion

After a chaotic last week due to SEBI’s new margin norms, stock trading in India is returning to normalcy.

On Tuesday, the two stock exchanges, their clearing corporations and depository participants, including NSDL and CDSL, issued a joint statement saying, “The transition to new margin pledge process with significant amount of margin pledges/re-pledges has now stabilised. Settlements for ‘today’ have been completed seamlessly on time.”

However, trading volumes in the equity cash segment on the National Stock Exchange and the BSE are still low compared to the August averages. But trade settlement, the pay-in and pay-out of funds, happened on time on Tuesday. The average trading volumes in the past six trading sessions since September 1 have seen a 25 per cent decline on the NSE and a 29 per cent dip on the BSE. The volumes are yet to show any major improvement.

Brokers say their clients are now sitting on the fence waiting for the systems to stabilise and also to get accustomed to the new routine of margin requirements in the cash segment. Some brokers said that un-pledging of shares, which is nothing but retrieving shares given for margin purposes, was not smooth, yet, and that is why market institutions are not saying anything about that.

In just three trading sessions last week, client shares worth nearly ₹138 crore were auctioned on the NSE and the BSE. It simply means that money for these shares did not come on time and settlement could not happen, resulting in auction by the exchanges. In two trading sessions this week, shares worth over ₹27 crore were auctioned, which is still higher than the average of August, brokers say.

For the first time in 25 years, the (T+2) trade settlement cycle was disrupted last week. This was due to tech glitches mainly at with the DPs as they seemed unprepared for SEBI’s new margin collection norms that kicked-in from September 1. The DPs, though, had said that brokers’ systems were not upgraded for the new system.

Unlike the earlier when clients could buy, sell or trade in the equity cash segment without any margin with most brokers, now they are required to make 20-30 per cent upfront deposit for any activity. Brokers are accepting shares as margin. Thus, pledging, re-pledging and un-pledging of shares is being done via mobile phone instructions, OTP (one time password) authentication. This had jammed the systems last week.

Short or no collection of margin now attracts penalty, per SEBI’s new rule. But the NSE has put off the penalty provision till September 15 to curb chaos.

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