NSE’s investor protection fund set to triple to Rs 1,500 crore after Sebi advisory

Sebi has linked the IPF amount with trading volumes. The NSE derives 95 percent of its volumes from cash and derivatives trade.

The size of the National Stock Exchange’s Investor Protection Fund (IPF) will increase three times after a new framework was laid out for it by the Securities and Exchange Board of India (Sebi). The market regulator has mandated a higher IPF be maintained in relation to trading volumes.

The IPF is used to refund investors who lose money in the event of a default by brokers. Investors are paid up to Rs 25 lakh under this arrangement.

A safety net

The NSE had around Rs 585 crore of IPF money, less than the Bombay Stock Exchange, which has about Rs 750 crore. Sebi chairman Ajay Tyagi had raised concerns about IPF money during a recent conference on capital markets.

A note from the NSE said: “SEBI has also advised NSE to increase the size of its IPF corpus to Rs 1,500 crore in order to protect the interests of investors in light of recent broker defaults. The adequacy of the IPF corpus will be reviewed on a half-yearly basis and incremental contributions will be made to the IPF, if required. NSE is focussed and committed to further strengthening investor protection through a variety of measures, including focussed investor education, enhanced broker supervision and surveillance in view of the recent defaults of Trading Members".

A source close to the development told Moneycontrol: “Sebi had formed a sub-committee to look into this matter and the regulator gave instructions to increase the IPF.”

Moneycontrol had reported on October 21 about Sebi increasing IPF money and setting up a new mechanism. The Sebi chairman had stated then that the IPF was woefully inadequate, and that the regulator would work with exchanges to increase the fund size.

The IPF is maintained by exchanges. The Bombay Stock Exchange (BSE) has around Rs 750 crore, while the National Stock Exchange (NSE) has less than Rs 500 crore, sources told Moneycontrol.

Trading volume link

Sebi has linked the IPF amount with trading volumes. “This may see more money being raised on the NSE, which, unlike the BSE, derives 95 percent of its volumes from cash and derivatives trade,” a source said.

Currently, exchanges collect money for the IPF in two ways — from the 1 percent listing fee they receive from companies on a quarterly basis, and the interest earned on the 1 percent security deposit kept by issuer companies, or brokers, at the time of offering securities to the public for subscription.

Since the number of companies on the NSE is low, its capacity to collect IPF is weak. This means that even if an investor loses money, the IPF may not be enough to compensate him. There has therefore been a demand from investors to link IPF to trading volumes.

Comments

Tata Realty looks to list 20 million sq ft of commercial assets as REIT

The existing land bank has potential of 20 million sq. ft commercial development in the next three to four years, says CEO Sanjay Dutt Tata Realty and Infrastructure (TRIL) is planning to list its Real Estate Investment Trust (REIT) with a portfolio of 20 million sq ft of commercial assets in the next few years. This will be done after the portfolio is expanded from present 6.2 million sq ft to 20 million sq ft via new developments and acquisitions. Sanjay Dutt, managing director and chief executive officer of TRIL told The Economic Times that the existing land bank has potential of 20 million sq ft commercial development in the next three to four years. The portfolio may also include office spaces and data centre assets. He added that his team has looked at least four proposals from developers looking to monetise their portfolios including single assets and carved-out portfolios across the country. “We are targeting a 45-50 million sq ft in commercial portf...

Max India shares fall 5% on relisting day

Max India resumed trading on BSE and NSE on August 28. The company, earlier known as Advaita Allied Health Services Limited, is a part of the $3-billion Max Group. Even as the broader market sentiment was bullish, shares of Max India fell 5 percent on BSE on the day of its relisting. The stock debuted at Rs 80 on BSE but fell 5 percent soon to touch its lower price band at Rs 76 on August 28. Max India resumed trading on BSE and NSE on August 28. The company, earlier known as Advaita Allied Health Services Limited, is a part of the $3-billion Max Group. The new Max India is the holding company of Max Group’s senior-care business Antar and the skilling company Max Skill First. The relisting of Max India follows Max Healthcare’s listing last week. In a media release, the company said listings are the outcome of a comprehensive scheme announced last year that involved a series of transactions, including the demerger of KKR-backed Radiant Lifecare’s assets into Max ...

Brokerages place bets on Titan, see double-digit upside in the stock

Titan can get benefits from the strong market share in the jewellery and wrist watches segment, mainly driven by a wide range of product portfolio catering mainly to the premium and value-added designer jewellery segment. After three consecutive sessions of losses, shares of Titan Company rose over a percent in morning trade on BSE on September 23. The company was dealt a severe blow by COVID-19 as the pandemic triggered strict lockdowns completely battered the retail sector. In the calendar year so far, shares of this one of the largest, most efficient and profitable specialty retailer in India are 7 percent down. The company reported a net standalone loss of Rs 270 crore for the quarter ended June 2020 as the COVID-19 pandemic hit business. The loss was higher than a CNBC-TV18 poll estimate of Rs 175 crore. Standalone revenue during the quarter declined 62.3 percent year-on-year to Rs 1,862 crore compared to the corresponding period last fiscal. Light at the end ...

SD Solutions

Search This Blog