NEW DELHI: Shares of most stocks broking companies slipped in Monday's morning session after with the market regulator barred them from pledging clients shares to raise funds.
Shares of Vertex Securities (down 12.66 per cent), Prime Securities (down 3.20 per cent), Stampede Capital (down 3 per cent), LKP Securities (down 2.06 per cent), Aditya Birla Money (down 1.02 per cent), ICICI Securities (down 0.91 per cent), 5Paisa Capital (down 0.62 per cent), Alankit (down 0.32 per cent), BN Rathi Securities (down 0.80 per cent) and Inditrade Capital (down 0.75 per cent) slumped upto 12 per cent.The Securities and Exchanges Board of India (Sebi) has come out with a new set of regulations essentially to ensure brokers dont misuse securities of one client to fund another client.
However, these changes will have a major impact on brokers working capital and their business as these will restrict their access to funds, market participants said.
The flexibility enjoyed by the clients where brokers could raise funds for them by using their securities for their positions has been withdrawn, said Uttam Bagri, chairman at Bombay Stock Exchange Brokers Forum.
Now, either the broker will fund the client out of his own pocket, or where broker cannot extend credit facility, the client will have to directly raise funds from another entity like an NBFC or bank, he added.As per the new guidelines, which would come into effect on September 1, shares lying with a trading or clearing member in client collateral account, client margin trading securities account and client unpaid securities account will not be permitted to be pledged or transferred to banks or nonbanking financial companies (NBFCs) for raising funds by members, ET reported.