The Reserve Bank of India’s (RBI) tightened rules for loans taken by firms that undertake proprietary trading in shares and commodities, and offer leverage to clients, the latest measure aimed at reducing speculative market activity in the South Asian nation.
All credit facilities to securities firms would have to be backed by collateral, while lending for trading on their own account or investments by brokers would be prohibited, a statement published on the RBI Web site on Friday said.
The so-called prudential rules for capital market intermediaries such as stock and commodity brokers are to come into effect from April 1, the RBI said.
Photo: Reuters
The stricter measures would raise the cost of raising capital by proprietary trading firms and squeeze profits. While Indian banks traditionally do not directly finance proprietary trading, the directive closes a loophole that allowed short-term working capital loans given by banks to be diverted for trading by brokers.
Proprietary trading firms accounted for more than 50 percent of equity options turnover on the National Stock Exchange of India Ltd (NSE) — the country’s biggest stock bourse — last year, data showed.
In cash equities trading, their share hit a 21-year high on the NSE at about 30 percent.
The latest step comes just days after India sharply raised transaction tax on trading of single-stock and index derivatives to reduce speculative trading. Combined with the central bank’s new rules, market participants fear the rules could hurt volumes.
The RBI has also asked banks to demand that guarantees extended by them on behalf of a broker for proprietary trades to be fully secured, with 50 percent of collateral being in cash, and rest as cash equivalents and government securities. The new rule would narrow the type of securities trading firms can offer as collateral to banks.
The central bank also tightened lending rules for margin trading facility under which stock brokers offer leverage to their clients. Loans given by banks for the product would have to be fully secured by cash and other liquid securities. Stocks offered as collateral by brokers would be considered at a 40 percent valuation discount.
Margin trading facility has grown rapidly into a more than 1 trillion rupees (US$11.04 billion) market for stock brokers, where clients can get leverage of up to five times their capital.
SECOND-RATE: Models distilled from US products do not perform the same as the original and undo measures that ensure the systems are neutral, the US’ cable said The US Department of State has ordered a global push to bring attention to what it said are widespread efforts by Chinese companies, including artificial intelligence (AI) start-up DeepSeek (深度求索), to steal intellectual property from US AI labs, according to a diplomatic cable. The cable, dated Friday and sent to diplomatic and consular posts around the world, instructs diplomatic staff to speak to their foreign counterparts about “concerns over adversaries’ extraction and distillation of US AI models.” Distillation is the process of training smaller AI models using output from larger, more expensive ones to lower the costs of training a powerful new
Shares of Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) have repeatedly hit new highs, but an equity analyst said the stock’s valuation remains within a reasonable range and any pullback would likely be technical. The contract chipmaker’s historical price-to-earnings (P/E) ratio has ranged between 20 and 30, Cathay Futures Consultant Co (國泰證期) analyst Tsai Ming-han (蔡明翰) told Central News Agency. With market consensus projecting that TSMC would post earnings per share of about NT$100 (US$3.17) this year, supported by strong global demand for artificial intelligence (AI) applications, and the stock currently trading at a P/E ratio of below 25, Tsai said the valuation
The artificial intelligence (AI) boom has triggered a seismic reshuffling of global equity markets, with Taiwan and South Korea muscling past European nations one by one. With its stock market now valued at nearly US$4.3 trillion, Taiwan surpassed the UK, Europe’s biggest market, earlier this month, data compiled by Bloomberg showed. South Korea is about US$140 billion away from doing the same. The tech-heavy Asian markets have shot past Germany and France in the past seven months. The shift is largely down to massive gains in shares of three companies that provide essential hardware for AI: Taiwan Semiconductor Manufacturing Co (TSMC, 台積電),
The US Department of Commerce last week ordered multiple chip equipment companies to halt shipments of certain tools to China’s second-largest chipmaker, Hua Hong Semiconductor Ltd (華虹半導體), its latest action to slow the country’s development of advanced chips, two people familiar with the matter said. The department sent letters to at least a handful of companies informing them of restrictions on tools and other materials destined for two Hua Hong facilities US officials believe make China’s most sophisticated chips, the people said. Top US chip equipment companies Lam Research Corp, Applied Materials Inc and KLA Corp, each of which has significant
RSS