NSE Current Affairs - 2020

Aditya Birla Finance becomes first company to list commercial papers on stock exchanges

Aditya Birla Finance Ltd (ABFL), the Non-Banking Financial Company (NBFC) arm of Aditya Birla Capital, has now become the first company to list its commercial papers (CPs) on stock exchanges. The move comes after stock exchanges- the BSE (Bombay Stock Exchange) and NSE (National Stock Exchange), came out with a framework for listing of commercial papers (CPs), in a bid to broaden investors’ participation in such securities.

Key Highlights

Aditya Birla Finance is first company to list its commercial paper with value date of 28 November 2019 and maturity date on 7 February 2020. ABFL is a well-diversified NBFC with a long-term credit rating of AAA (stable) from both ICRA as well as India Ratings.

Listing of commercial papers is expected to lead to an efficient transmission of information regarding corporate borrowings and liquidity positions to market participants. It will also contribute effectively towards development of CP market and is expected to have a positive effect on debt capital market.

What is a Commercial paper?

It is an unsecured money market instrument which is issued in form of promissory notes that enables highly rated corporate borrowers to diversify their sources of short-term borrowings. It also provides an additional instrument to investors. CPs can be issued for maturities between a minimum of 7 days and a max of up to 1 year from date of issue. They are usually issued at a discount from face value and reflects prevailing market interest rates.

SEBI bars NSE from securities market for 6 months: Co-Location Case

The Market regulator Securities and Exchange Board of India (SEBI) has barred National Stock Exchange (NSE) from accessing the securities market for six months and also imposed a fine of ₹1,000 crore on NSE in co-location case.

Co-Location Case

  • Co-location refers to system wherein a broker’s server is kept in the exchange premises to reduce latency (as it directly influences the amount of time trader takes to interact with market), or delay in computing terms, while executing trades.

 

  • In 2015, SEBI received complaints against NSE in which it was alleged that the system used by NSE to disseminate data through co-location facilities was partial, as it allowed users to get information before others and thereby created an information asymmetry between users.

SEBI’s verdict in Co-Location Case:

  • As inspected under the SEBI ‘Prohibition of Fraudulent and Unfair Trade Practices rules’ (PFUTP) Regulations, NSE was found guilty of committing fraudulent and unfair trade practice and it also did not exercised requisite due diligence while putting in place the TBT (tick-by-tick data feed) architecture, thus affecting market fairness.
  • SEBI has barred the NSE from accessing the securities market for six months as its actions.
  • It has fined NSE for almost ₹1,000 crore (i.e. ₹89 crore plus 12% interest) from 1 April 2014 for its alleged failure to exercise proper due diligence while offering co-location facility.
  • The disgorgement amount is required to deposited in Investor Protection and Education Fund (IPEF).
  • It also directed former and current top employees in the management of exchange to not hold any position in a stock exchange for a period of two to three years.

Note: NSE has the largest market share in equity segment and almost a monopoly in equity derivatives.