In an attempt to curb volatility, SEBI has modified the limits of the circuit filter of indices, which will now be calculated on a daily basis instead of on a quarterly basis
Market regulator Securities Exchange Board of India (SEBI), has modified the circuit filter mechanisms for stock exchanges, particularly the BSE and National Stock Exchange (NSE). The move is aimed to supposedly contain volatility. The SEBI circular (CIR/MRD/DP/25/2013), issued on 3rd September, stated: “The stock exchange on a daily basis shall translate the 10%, 15% and 20% circuit breaker limits of market-wide index variation based on the previous day's closing level of the index.” The new rule is expected to come to effect from 1st October.
Earlier, the circuit filter levels were decided on a quarterly basis, while the percentage levels remains the same at 10%, 15% and 20% of the market-wide index variation. When the circuit filter is activated, the market comes to a halt depending on which band is activated (i.e. 10%, 15% or 20%), but this time the duration of the halt has been reduced by 15 minutes for each of the respective percentage levels. After that, there will be a pre-open call auction session in the cash segment of the exchanges.
The circular said, “Post-observation of the trading halt, stock exchange shall resume trading in the cash market with a 15 minutes pre-open call auction session. In order to accommodate such pre-open call auction session, the extent of duration of the market halt prescribed vide SEBI circular 28 June 2001 shall be suitably reduced by 15 minutes.”
According to SEBI’s old circular (SMDRPD/Policy/Cir-37 /2001, dated 28 June 2001), the duration of the halt are listed below. However, the duration of halt for each band is expected to be reduced by 15 minutes post 1st October.
The circular was issued after taking into the consideration of the recommendations of Secondary Market Advisory Committee (SMAC).
It now appears that the former CMD of SIDBI was appointed as additional director on FT board on 22nd August but on 27th August he submitted his resignation without any explanation for this sudden exit!
Jignesh Shah-led Financial Technologies (India) Ltd (FT) appointed N Balasubramanian as additional director on 22 August 2013. However, within five days, the former chairman and managing director (CMD) of Small Industries Development Bank of India (SIDBI) resigned from the Board. Neither FT nor Balasubramanian have given any reason for this sudden exit.
In its addendum issued on 22nd August for the upcoming annual general meeting (AGM), FT mentions the appointment of Balasubramanian as an additional director pursuant to Section 260 of the Companies Act, 1956. The same addendum also mentions Ravi K Sheth withdrawing his consent for re-appointment as a director of the company.
"N Balasubramanian who was appointed as an Additional Director pursuant to Section 260 of the Companies Act, 1956 at the Board meeting held on 22 August 2013, and who holds office upto the date of the Twenty fifth Annual General Meeting and in respect of whom notice under Section 257 of the Companies Act, 1956 has been received proposing N Balasubramanian as a candidate for the office of Director of the Company, be and is hereby appointed as a Director of the Company liable to retire by rotation,” the notice says.
In addition, the company board also recommended appointment of Balasubramanian as director through another addendum issued on the same date.
However, the next addendum to the AGM notice, issued on 27th August, says that FT had received a letter from both Balasubramanian as well as CM Maniar, resigning from the Board. The directorships of Financial Technologies group are turning out to be a joke.
Indian Bullion Markets Association was one the biggest borrowers from the borrowing/lending racket of National Spot Exchange Ltd, amounting to Rs1,159 crores. With a name like that, was this group of company of Financial Technologies, the promoter of NSEL, masquerading as a trade body, lobbying on behalf of the group?
One of the members very active in scam-ridden NSEL was Indian Bullion Markets Association (IBMA). Contrary to what the name suggests, or what has been claimed by NSEL, IBMA is not a trade association or a lobbying body for industry-related issues. IBMA is yet another FT-MCX group entity which falls foul of the names and emblems statute. But it obviously got the name because of the clout of the FT-MCX group. Since this ‘association’ was an active trader and promoted by the FT group, we had asked Jignesh Shah whether it was a sub-broker of the Exchange. We were told, “IBMA is not a sub-broker but a member of the Exchange (NSEL). It has around 130 bullion dealers and jewellers from across the country as its shareholders. PEC Ltd (formerly Project & Equipment Corporation of India Ltd), a government company, is also its shareholder. It was conceptualised and called an ‘Association’ because it was promoted by NSEL in a cooperative structure along with various stakeholders such as small jewellers and bullion traders, with an aim to work as an aggregator.”
It was lobbying with the ministries of agriculture, consumer affairs and finance. Apparently, these ministries even invited it to be represented on policy-making committees. Is it believable that retired regulators, Union secretaries and other high-ranking bureaucrats on the boards of FT-MCX group companies did not know that a trading member of an exchange was masquerading as an ‘industry association’? It is now disclosed that IBMA was one of the biggest traders with an investment of Rs1,200 crore by 146 shareholders. These investors were clearly lured by the promises of the FT promoters themselves.
All this raises several questions. Were there any Chinese walls between NSEL and IBMA? Did the MCon check or question it? Clearly, the reason why there is no action against NSEL, its promoters or even its sacked employees, is that its tentacles reach far too deep into this government.