Partner Channels: Bill Pay | Health | IT Education | Jobs | Technology | Travel
June 29, 2001
|
|
|
|
|
|
||
|
Channels: Astrology | Broadband | Contests | E-cards | Money | Movies | Romance | Search | Wedding | Women Partner Channels: Bill Pay | Health | IT Education | Jobs | Technology | Travel |
||
|
|
||
|
Home >
Money > Business Headlines > Report June 29, 2001 |
Feedback
|
|
|
Badla may live on at brokers' levelSangita Shah & Savio G Pinto Badla is dead. Long live badla. The death knell for the funding mechanism will officially ring on July 2, but one will probably still find it alive and kicking at the brokers' level. Several large brokers are planning to set up a separate subsidiary (read non-banking finance outfit), specifically designed to route the funds for transactions in the stock markets. These entities are necessary, as brokers will not be able to lend funds directly under the present regulations. While no broker is willing to go on record, sources at major brokerage houses said that they were formulating a mechanism to fulfil the funding needs of market players. Some of them are planning to provide badla mainly to facilitate their clients and bridge the gap between the money and shares lenders on one hand and speculators on the other hand. Although this may not bring any revenue directly, it would help in boosting trading volumes at their ends because the inadequacies which speculators face would automatically be taken care of. The need for funding becomes all the more necessary because of the drastic steps taken in limiting banks' exposure to the capital markets. "These steps are bound to severely impair the normal and smooth functioning of the spot or cash market, which would make it susceptible to severe bouts of volatility. Impact costs are also bound to increase. Risks sought to be contained will now increase with speculators and other entities turning to private financiers to bridge the need for margin funding," a leading broker said. Perhaps no market in the world has a system, which is devoid of margin trading, since it is an essential ingredient of any dynamic market. In the Indian context, badla was the legitimate form of margin trading. However, with the hangover of the recent stock market crisis still there, some brokers are wary of venturing into areas which are perceived to be risky. Some brokers are however sceptical about the idea of private badla. "In the presence of derivatives trading which provides the much needed platform for speculation, where does the need arise for such highly risky propositions?" asked Nimish Shah, CEO and director of Parag Parikh Securities. Powered by YOU MAY ALSO WANT TO READ:
|
||||
