RBI funding curbs had no striking impact on prop traders, says NSE
Proprietary traders used corporate bonds and extended bank guarantees to manage the impact of new Reserve Bank of India regulations, according to the NSE.
National Stock Exchange (NSE) chief business development officer Sriram Krishnan stated that proprietary traders have managed to sustain equity market activity despite recent Reserve Bank of India (RBI) curbs on bank funding. Speaking during the exchange's second-quarter earnings call, Krishnan said there was no striking impact on proprietary trading volumes from the regulatory change, according to Mint.
Krishnan explained that market participants, specifically brokers potentially affected by the rules, extended existing bank guarantees by several months and issued corporate bonds to raise money. The RBI circular regarding bank funding for proprietary traders was originally scheduled for 1 April but was deferred for three months, taking effect on 1 July.
NSE's profit after tax for the July-September quarter fell 17 per cent sequentially to ₹2,578 crore. The exchange reported that this decline was due to regulatory changes, the West Asia war, and rising oil prices. Revenue from operations fell 11 per cent quarter-on-quarter to ₹4,067 crore, while operating profit declined 14 per cent to ₹3,079 crore.
Regarding the Securities and Exchange Board of India (Sebi) closing auction session implemented on 3 August, Krishnan noted its impact was more significant on settlement prices for expiring index options than on the cash market. Following feedback, Sebi will return to the previous volume-based settlement mechanism for derivatives contracts for one year starting 7 December.
Krishnan expects the NSE market share in equity options to consolidate between 70 per cent and 72 per cent from the 68 per cent recorded at the end of the September quarter. On a year-on-year basis, NSE net profit grew 23 per cent, while operating revenue rose 11 per cent.