Street wants ALBM back

The sharp corrections in the market, mostly triggered by margin calls, have forced players to demand the re-introduction of the margin finance system.

They said the automatic lending and borrowing mechanism (ALBM), which was withdrawn following the 800-point fall in the Sensex on May 18, 2004, would have helped the market to sustain the healthy correction.

ALBM allows players to take delivery of shares rather than squaring off to meet margin calls, when there is a sharp downturn.

"Market meltdown is owing to the absence of margin finance system. Only handful of brokerage houses are doing proprietary funding and are squaring off like no tomorrow," said S P Jain, CMD of Networth Stock Broking.

He explained that the May 18 fall was owing to unhealthy elements and not the failure of ALBM as such.

"ALBM allows players to settle the trade in stocks, instead of cash. Currently, big players including FIIs cannot fully use their idle stock, which ALBM would help them to use," said Sashi Bhushan, head (equities) at IL&FS Investsmart.