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Last Updated : Mar 24, 2020 01:52 PM IST | Source: Moneycontrol.com

ANMI requests SEBI to shut stock market if state govts do not support services

Analysts/experts feel the closing of exchanges is not a feasible option right now.

Here is a list of the top 10 most-valued firms in India by market capitalisation on the Bombay Stock Exchange, as of February 17, 2020.
Here is a list of the top 10 most-valued firms in India by market capitalisation on the Bombay Stock Exchange, as of February 17, 2020.

Association of National Exchanges Members of India (ANMI) on March 23 requested capital market regulator SEBI to shut down stock exchanges if state governments do not declare broking and depository operations as essential services.

Most states have either announced a complete lockdown or a curfew to stop further transmission of the novel coronavirus or COVID-19 as the reported infected cases in India rose to nearly 500 with 9 deaths.

For the time being, given the above data, India is still in a better position than other countries like Italy, Spain, China, Germany, South Korea, United States, Iran, etc. Worldwide the infected cases stood at over 3.3 lakh with nearly 15,000 deaths.

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Earlier, ANMI had requested SEBI to issue advisory to State Governments to include 'stock broking and depository services' as essential services and inform all state governments to issue necessary guidelines to that effect.

But SEBI has not issued any advisory/circular in this matter, said ANMI, adding except state government of Maharashtra, Gujrat, and Rajasthan, no other State has declared 'stock broking and depository services' as essential services.

Hence, "in case all States do not declare 'share broking and depository services' as essential services exempt from lockdown/curfew, then announce the closure of share markets giving two days' time to share brokers to close their entire outstanding position," the association requested as it worried about their members and staff.

ANMI members and their staff are facing huge problems to reach their head office to operationalize their central server, back-office functions, risk management, and depository services to meet the requirements of their clients and compliance of Exchanges/ SEBI, said ANMI.

"In many cases, members have reported that even their skeleton staff could not reach their head offices, in states of Delhi, Haryana, Uttar Pradesh, West Bengal, Tamil Nadu, Karnataka, etc., on account of complete lockdown declared by the respective States. In fact, curfew has been imposed in the State of Punjab," it added.

"Staff families are in panic and worried about the health of their bread earning members. The situation is grim in other States also," it said.

However, analysts/experts feel the closing of exchanges is not a feasible option right now as if it happens, then it will be a complete loss of reputation and confidence from a global standpoint, and also it will disrupt redemptions in global ETFs.

"The closing down markets would disrupt redemptions in global ETFs invested in India since portfolio investors have been selling and any shutdown of markets leading to such disruption shall affect the outflows which is not a position we want to be in as a rising economic power," Vinay Pandit, Head - Institutional Equities at IndiaNivesh told Moneycontrol.

Especially since no country, barring Philippines, has shut down their exchanges during the coronavirus issue, including China, he said.

Jimeet Modi, Founder & CEO at Samco Securities also said the shutting down stock exchanges would mean a complete loss of reputation and confidence from a global standpoint. "Most markets are trading online including India. Shutting down India's markets when the rest of the world (including Italy, Spain, etc) still operates online would mean and send a signal that we can't have minimal business continuity plan (BCP) as compared to the rest of the world?."

Modi cited the example, saying what happens to someone who wants to redeem money fro11 a liquid fund or a debt fund or an equity fund to pay for any expenses, hospitalization, or even any living expenses, etc?

"What happens if you shut down the market for 5 days to see it reopen 20-30 percent lower gap down in 5 days. Say the Nifty does open lower, what happens to the systemic risks that get opened up for brokers, clients, clearing corporations, exchanges because of panic in re-opening?," he explained.

Hence, analysts/experts fell a temporary ban on short-selling can be a great option in such cases if the market keeps falling drastically.

"Banning short-selling temporarily can be an option coupled with regulatory and compliance relaxation for brokers to execute trades in a work from the home methodology," Vinay Pandit said.

Capital market regulator SEBI has been announcing several measures to curb the market volatility and to support the listed firms/market participants etc.

Indian equity benchmarks already fell more than 37 percent from their record highs seen in January due to global turmoil led by COVID-19.

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First Published on Mar 24, 2020 01:52 pm
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