The 125-year old practice of kerb trading at the Bombay Stock Exchange (BSE) will come to a halt.
The Securities and Exchange Board of India (Sebi) diktat on negotiated/kerb trades comes to effect from June 2, stating that negotiated deals would have to compulsorily result in delivery of securities.
This move will result in kerb trading to be thrown out of the BSE.
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The Securities and Exchange Board of India diktat is based on a consensus reached by all exchanges in March.
Meanwhile, there is a possibility that the Bombay Stock Exchange may increase the trading hours.
A senior BSE governing board member, who has been vociferous in supporting kerb transactions, says, "A 125-year old practice has been stopped by the Sebi diktat.
Though this practice was not considered legal and was outside the ambit of the stock market, it was not harmful in any way."
He questioned the Sebi motive behind the move to clamp down on kerb trade.
"While the Bombay Stock Exchange can ensure that its members will not indulge in kerb trading and generally follow other Sebi directives, brokers from other bourses are clearly flouting these norms. So why is BSE being singled out?" he added.
BSE has two types of negotiated deals, normal negotiated deals where deals were netted out along with normal trades and special negotiated deals which were resulting into trade to trade deliveries.
The Sebi diktat will result in the bourse doing away with the former and retaining only the latter.
Purvesh Shah, chief dealer at Asit C Mehta Investment Intermediaries says the traditional brokers who practiced kerb will be affected in the short-term.
However, he feels that the move is in line with the capital market reforms as the exchange is set to expand across the country.
"Kerb trading does not take place on the National Stock Exchange, so there is nothing wrong if the Bombay Stock Exchange stops this practice. But if market sensitive news erupts, the broking community will be affected as the impact of a major event will be reflected only the next day," he said.
According to a section of brokers, there is a need for creating a system that will meet demands of the market place which will ensure fairness, transparency and proper information dissemination.