Page 66 - DMGT512_FINANCIAL_INSTITUTIONS_AND_SERVICES

Unit 5: Securities and Exchange Board of India

(b) An SCM can clear and settle trades on his own account or on account of his client Notes
only and not for any other Trading Member.
Clearing Members of the Derivatives Segment (including Trading cum Clearing Members), are
required to maintain the net-worth criteria of 3.00 crores, as per the following formula prescribed
by SEBI.

Capital + Free Reserves – Non-allowable assets

Notes Non allowable assets include:
1. Fixed assets
2. Pledged Securities (Pledged securities are required to be deducted at book value).
3. Member's card

4. Non-allowable securities (unlisted securities)
5. Bad deliveries
6. Doubtful debts and advances (debts/advances overdue for more than three months
or given to associates)
7. Prepaid expenses, losses
8. Intangible assets
9. 30% of marketable securities (30% of Book value or Market Value, whichever is
lower, of marketable securities).

!

Caution 1. Pledged securities are not to be considered at point no. (i)
2. Securities held as stock-in-trade, are not to be considered at point no. (i)
In the meantime, derivatives trading on the NSE (National Stock Exchange) picked up
significantly since it was launched. Daily trading volumes in Nifty futures and options, and
options on individual stocks, averaged 300 crores for some time. In contrast, trading in the
BSE's (Bombay Stock Exchange) derivatives (Sensex options and futures and options on stocks)
remained lacklustre, with an average daily volume of about 4 crores.
In a bid to stimulate derivatives trading, the BSE invited prospective market-makers with a
range of sops. For broker-members willing to commit to market-making, the exchange would
waive the charges for the use of up to two VSATs or leased line links to the trading system. It
would also waive its transaction fees (except for contribution to trade guarantee fund and
investor protection fund). In return, market-makers would have to commit to offering quotes
for purchase or sale of their chosen derivative products for a stipulated minimum order quantity.
They also had to specify a spread (the difference between 'buy' and 'sell') prices below a stipulated
figure. The market-maker's quote did not, however, enjoy any precedence over other quotes,
once trading started. These were pretty stringent requirements. The 'incentives', on the other
hand, were niggardly-the transaction charges that the BSE offered to waive were as low as 0.002
per cent of the traded value. As such, the sops were unlikely to catalyse any significant increase
in trading volumes.
Till June 2009, derivatives' trading on BSE was done only through Derivatives Trading and
Settlement System (DTSS), which used to generate trades by matching orders.

LOVELY PROFESSIONAL UNIVERSITY 61