Margin trading yet to take off

Only 20 of the 764 NSE members have registered for offering such services

Almost four months after it was introduced with much fanfare, margin trading has failed to take off. The market has not taken too kindly to 'margin trading', the secure version of the infamous automatic borrowing and lending mechanism (ALBM) which was scrapped four years ago.

Sources said only 20 of the 764 corporate members on the National Stock Exchange (NSE) have registered for offering margin trading services so far.

The figures on the Bombay Stock Exchange (BSE) are even lower, though the exact numbers were not available. BSE officials confirmed that there are very few applications from the 550-odd members.

Brokers said the lukewarm response to margin trading does not come as a surprise as "the guidelines are difficult to follow."

Market sources agree that margin trading is required and they had been demanding an alternative to the ALBM system, famously scrapped in 2000.

Though they concede margin trading is a quantum leap ahead of the old badla and ALBM systems, as it has better risk management systems built in, the current norms are being seen as too demanding.

But for all the demand, only a few big brokerage houses, such as Kotak Securities, Motilal Oswal Securities, Anand Rathi Securities, Emkay Shares & Stocks and Refco Sify Securities have confirmed having applied to the BSE.

The Securities & Exchange Board of India (Sebi) has allowed member-brokers of the exchanges to provide margin trading facilities to their clients in the cash segment.

The capital markets watchdog said trading members who want to provide margin trading would be required to comply with the prescribed norms which include trading members reporting the details of gross exposure to margin trading on the exchange on a daily basis.