IL&FS Securities troubles mount; traders let derivatives lapse, demand collateral: Report
While traders want delivery of shares against pending dues, ISSL is not in a position to make the payment, intensifying the crisis
July 29, 2019 / 03:05 PM IST
IL&FS Securities (ISSL) is faced with an uphill task as some of its traders let their derivative positions for July series expire and demand return of collateral, reports Business Line.
While traders want delivery of shares against pending dues, ISSL is not in a position to make the payment, intensifying the crisis, the report said.
Moneycontrol could not independently verify the report.
The company was removed as an NSE Clearing Corporation (NCC) member on July 25 after it failed to make payments worth crores to the latter.
The trouble is two-fold as while the NCC payment is due, as many as 150 traders who had Rs 300 crore tied to the company in the form of collateral for derivative positions also want returns.
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.
A clearing member guarantees payment to CCs on behalf of brokers, while the CCs stand guarantee to counter-party risk. The collateral held by CCs is from brokers for trading positions.
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.