CARRY FORWARD SYSTEM.
The Indian Stock Exchanges have been an amalgam of cash market and forward market.
The prices of the scrips on the exchange did not reflect their ‘true’ price in the underlying cash market.
Further there was indiscriminate and rampant speculation in the market.
Defaults were common and other members were forced to “accommodate” the defaulting member.
Often, the defaults had a snowballing effect and the entire market would be in the throes of a major payment crisis.
This frequently resulted in the closure of the exchanges for a few days. In order to curb the prevailing malpractices, SEBI banned carry forward transactions on all stock exchanges.
The Indian Stock Exchanges have been an amalgam of cash market and forward market.
The prices of the scrips on the exchange did not reflect their ‘true’ price in the underlying cash market.
Further there was indiscriminate and rampant speculation in the market.
Defaults were common and other members were forced to “accommodate” the defaulting member.
Often, the defaults had a snowballing effect and the entire market would be in the throes of a major payment crisis.
This frequently resulted in the closure of the exchanges for a few days. In order to curb the prevailing malpractices, SEBI banned carry forward transactions on all stock exchanges.