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IL&FS Securities declares default; says it is unable to pay its broking members

The brokerage said it will not be able to pay its broking members as NSE Clearing Corporation, the clearing and settlement arm of the National Stock Exchange, has not released its payment

July 31, 2019 / 10:13 AM IST

IL&FS Securities Services (ISSL) declared default on June 29, reports Business Line.

The brokerage said it will not be able to pay its broking members as NSE Clearing Corporation (NCC), the clearing and settlement arm of the National Stock Exchange, has not released its payment, the report said, adding that the move will severely impact several high net worth individuals and smaller players who traded in equity derivatives.

Moneycontrol could not independently verify the report.

The fallout from the Rs 380 crore Allied Financial fraud has cost the company dearly. ISSL has been weighed by troubles and the NSE Clearing Corporation (NCC) removed the company as a clearing member due to non-payment of dues on July 25.

Traders empanelled with the company also let their derivative positions for July series expire to demand the return of collateral, while the company was not in a position to make the payment, intensifying the crisis.

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ISSL failed to make payments worth Rs 400 crore to the NCC and had pending returns worth Rs 300 crore to as many as 150 traders tied to the company in the form of collateral for derivative positions.

ISSL is not in a position to repay brokers as the Rs 380 crore fraud by Allied, through IL&FS Securities, used client collateral for its own trades. The money was lost and dues piled up. The company’s other deposits with IL&FS Securities were disallowed as means for repayment by the NCC as the corporation awaits the court decision on the matter.

Stockbrokers with ISSL took the immediate hit as their terminals were ‘squared-off’ post the membership being cancelled on July 25. They were allowed to conclude on-going deals, but could not engage fresh transactions. ISSL thus blocked funds and held back on no-objection certificates (NOC) for traders to shift their businesses elsewhere.

The logic was to avoid settling the brokers’ accounts by returning collateral money.  ISSL did not reply to HBL's queries on the issue.
Moneycontrol News
first published: Jul 31, 2019 10:13 am

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