The members are of the view that the decision was taken in haste and also it was more an outburst against the trading members.
Members across the board felt the volume of business at the exchange will take a beating because of the NSE decision. Surprisingly the Association of NSE Members of India (ANMI) in a release stated it had never opposed the concept of indemnity bond.
"The ANMI was at no point of the time opposed to the idea of an indemnity bond from the members. On the contrary, in order to meet its objectives, the association had sent suggestions which were overlooked by the board of directors".
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A source at a leading FII brokerage said NSE's decision had come as a rude shock. "It is a very retrogative stance which the exchange has taken."
When asked whether FII business at the exchange will dip as a result of NSE's action, the source said "We are still waiting for specific details from the exchange. The bourse still talks about protecting the receiving broker and we have to see how the NSE will implement it."
The source added the exchange had definitely lost the edge which it had over the other exchanges. "The NSE's loss will obviously be the other exchanges gain," the source said.
Other trading members expressed similar fears. "The NSE's decision to withdraw guarantee for bad deliveries is definitely going to make buying at the exchange more riskier. To this extent the FII turnover may also come down," said Dhiraj Aggarwal of SSKI.
Another FII brokerage, on condition of anonymity, welcomed the bourse's decision. "It is good that the exchange has decided to drop the indemnity bond. However, the decision not to guarantee the settlement for bad deliveries is unfair. There is certainly a concern. However, how much of its will result in reality is yet to be seen."
Meanwhile, the exchange is reported to have received a lot of representation from trading members, who have expressed their eagerness to furnish the personal guarantee. It is learnt that some 300-odd members were willing to provide the indemnity bond as demanded by the exchange.