The National Stock Exchange (NSE) has blocked more than 35 per cent of membership deposits -- aggregating Rs 620 crore -- in illiquid assets as on March 2001.
The total illiquid investments of the exchange is around Rs 432 crore, which is Rs 218 crore higher than the NSE's net worth.
NSE at present has more than 950 active members. The liquid assets with the exchange are government securities of around Rs 261 crore and current assets of Rs 230 crore. NSE's current liability stands at Rs 86.60 crore.
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In a faxed response to Business Standard's query on the issue, an NSE official said: "The exchange has seen very few surrenders in the recent past and currently more than 950 members are active on different segements of the exchange. Though the business in the capital market is currently going through a low phase, we have begun to see an increasing trend in equity market volumes. The volumes in the debt market segment and derivative market segment has also seen a consistently increasing trend."
The Association of NSE member of India (ANMI) is upset over the use of membership deposits. "It may not be prudent for the exchange to use our deposits in building illiquid assets," pointed out a NSE member.
"Deposits are meant to give a market exposure to the member. Looking at the international trends, the deposits are always invested in highly liquid investment avenues. If there is a meltdown in the market, how will the exchange liquidate its assets to meet the liabilities?" he asked.
ANMI members point out that with NSE investing Rs 218 crore from members' deposits the exchange is left with Rs 405 crore as assets that can be easily liquidated. NSE has an equity base of Rs 45 crore and reserves of Rs 173 crore translating into a net worth of Rs 218 crore.
The members are also worried over deteriorating broking business conditions and financial impact on the exchange.
With a number of brokers across the country planning to shut down operations, the financial pressure on the stock exchanges will increase as it may see a massive redemption of members' deposits, said another member.
In the last six months, more than 900 trading terminals on the Bombay Stock Exchange has become inactive and several members surrending their VSAT connectivity. It is expected that aound 20-25 per cent members are in the process of surrending membership. This is expected to impact the turnover of both stock exchanges.