Bourses hold back profit transfer to settlement guarantee fund
Mumbai: Three national stock exchanges -- NSE, BSE and MCX-SX -- have held back transferring 25 percent of profits to their respective settlement guarantee funds, pending views of a SEBI-appointed expert panel on this issue.
Bourses are required to maintain a settlement guarantee fund (SGF) as a cushion for any residual risk, and it works like a self-insurance mechanism in the event of a trading member defaulting on settlement obligations.
Market regulator SEBI last year made it mandatory for all the stock exchanges to transfer 25 percent of their annual profits every year to a fund to guarantee settlement of trade of the clearing corporation which clears and settles trades executed on that bourse.
Following opposition from some quarters to this requirement, SEBI later set up an expert committee to look into the norms for adequacy of the core corpus of the SGF and Trade Guarantee Fund (TGF) and its sourcing, including transfer of profits by the stock exchanges to such funds.
Pending the recommendations to be made by this panel, none of the three exchanges has made any transfer of profits to their respective SGFs for 2012-13, even as all of them have posted profits for the year, totalling more than Rs 1,000 crore.
The country's largest bourse NSE saw its net profit grow by 25 percent to nearly Rs 878 crore, although BSE's net profit fell by 39 percent to Rs 108 crore.
MCX-SX, the newest kid on the block, also swung into profitability with a net profit of Rs 21.5 crore in 2012-13, as against a loss of Rs 2.6 crore in the previous fiscal.
Together, the three stock exchanges have held back a cumulative transfer of nearly Rs 250 crore to the SGF, while NSE's contribution alone would have been close to Rs 214 crore at the rate of 25 percent as prescribed by SEBI earlier.
Commenting on the matter, NSE said in a note to its financial results for the year that no transfer of profits to the Settlement Guarantee Fund have been made pending the report of the Expert Committee set up by SEBI in this regard.
In a similar note, NSE's rival BSE said: "Pending clarification from SEBI regarding the norms for sourcing (for SGF) including transfer of profits by stock exchanges to the above-mentioned fund, no transfer of profits has been recorded in the books of account as on March 31, 2013."
MCX-SX also said that no transfer of profits have been made in the books on account as on March 31, 2013, pending a decision by the SEBI-formed expert committee.
"The company would account it as and when SEBI takes the final decision," the exchange added.
NSE currently has the biggest SGF with funds totalling well above Rs 30,000 crore for equity and derivative segments, while that of BSE is estimated at around Rs 5,000 crore.