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Panel recommends ban of ALBM, BLESS

Our Bureau

MUMBAI, April 26

A SEBI panel has recommended scrapping of the carry-forward trading system from July 2.

The panel, headed by Prof J.R. Verma, Member, SEBI board, has also recommended that options and futures in select stocks be introduced from the above date.

The panel has suggested that carry-forward trading facilities including National Stock Exchange's Automated Lending and Borrowing Mechanism (ALBM) and Bombay Stock Exchange's Borrowing and Lending of Securities System (BLESS) should be discontinued.

Other deferral products which have been recommended for ban are the Modern Carry-Forward System (MCFS), Carry-Forward in Rolling Settlement (CFRS), Automated Lending and Borrowing in Rolling Settlement (ALBRS) and Continuous Net Settlement (CNS).

As for stock derivatives in the form of options and futures, the panel said that these products would perform the hedging functions currently being performed by these deferral products.

The recommendations would be placed before the next board meeting of SEBI, a press release said.

The move to ban carry-forward trading is to introduce an international trading system on Indian bourses.

SEBI had earlier announced that all scrips included in ALBM/BLESS or MCFS in any stock exchanges will be traded only in the compulsory rolling settlement across all stock exchanges.

The eight-member group was set up on April 12, to look into the need for having deferral products in addition to CNS in the rolling settlement.

According to market sources, the ALBM/BLESS system allows room for misuse as it gives enormous leveraging capability to stock brokers to play on clients' funds and earn returns far in excess of market rates.

However, the SEBI move is expected to further dampen market sentiment, sources said.

The carry-forward system was last banned in 1993.

Related links:
SEBI panel on deferral products

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