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Badla haunts CSE, last settlement reports Rs 20 million shortfall

Kausik Datta

Badla trading - the instrument responsible for making as well as unmaking of the Calcutta Stock Exchange - cast its long shadow on the bourse on Thursday, with it reporting a shortfall of Rs 20 million on a very small volume for settlement No.2002114, the last one allowed with badla, which ended on June 29.

The CSE was the first victim of the market mayhem in March, caused primarily due to unchecked trading and poor regulation of activities of brokers who were major players in the badla trade.

Confirming the development, CSE officials hastened to add that the bourse had enough "cover against the shortfall". The pay-in shortfall was due to the "inability of a handful of members to honour their pay-in obligations". The amount supposed to be deposited by brokers who bought shares on badla stood at Rs 320 million.

The CSE had recorded a payment shortfall of over Rs 1 billion on March 8. The payment shortfall snowballed into a bigger crisis, which led to, among other things, liquidation of the CSE elected board.

CSE officials, without naming the brokers failing to honour their payment commitment, said one member failed to cough up dues of nearly Rs 10 million. The combined outstanding of another 3 or 4 brokers added up to another Rs 10 million.

If the bourse authorities decide to cover the shortfall by drawing funds from other accounts of the defaulting brokers, the brokers concerned will be suspended from trading until they deposit fresh funds with the bourse.

The officials added that the defaulting brokers had been asked to bring in funds well before the last date of the settlement. However, the brokers did not listen to the advice. They said the brokers' position was not forcefully squared-off since they had enough funds deposited in other accounts with the exchange.

In a separate development, CSE authorities sought an explanation from the brokers involved in abnormal trading on Mahindra & Mahindra in the compulsory rolling segment on Monday and Tuesday.

The prices of M&M were jacked up by 118 per cent on Monday - the first day of the compulsory rolling settlement - to Rs 180 over the previous closing of Rs 82.50 through only one trade. On the following day, the scrip was pulled down to Rs 83. A top CSE official said the exchange would take proper action after hearing the concerned broker's explanation.

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