Funding curbs on prop traders: Brokers forum to meet RBI today

Subscribe to enjoy similar stories.Representatives of the Association of NSE Members of India (Anmi) are scheduled to meet Reserve Bank of India officials on Wednesday to seek a relaxation on recent measures which effectively bar banks from funding proprietary traders for capital markets trades, two people aware of the matter said.The meeting, requested for by ANMI, comes after the central bank on 30 March deferred its 13 February circular on banks' capital markets exposure for three months through 1 July. Prop traders are brokers who trade for themselves."There will be a meeting between three to four members of Anmi and relevant RBI officials," the first person said.

"It's important to convey to the RBI that there has been almost no default by any prop broker who availed of bank guarantees over the years."Prop firms presently secure bank guarantees from lenders by putting up small amounts of cash or cash equivalents as margin, along with personal or corporate guarantees.The RBI directions on 13 February laid out, among others, that banks may extend guarantees in favour of exchanges or clearing corporations for prop trading, provided these guarantees are fully secured by cash, cash equivalents and government securities, with a minimum 50% cash component."There has to be a connect to clarify matters, and that is due. If the regulator (RBI) has an issue, the industry can respond to it while voicing their own concerns," said the second person cited earlier.The person, however, wasn't sure whether the RBI would relax the curb on funding prop brokers for their capital market trades.Kamlesh Shroff, president of Anmi, was not immediately available for comment, while an email sent to RBI went unanswered.The RBI's strictures