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Badla system by kotak securities


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Kotak Securities reviews the Badla System

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Badla system by kotak securities

  1. 1. Badla System<br />
  2. 2. Badla System – What’s This?<br />
  3. 3. Badla System<br />'Badla' literally means 'something in return‘ and is the charge, the investor pays for carrying forward his position<br /> A Hedge tool, lets the investor take a position in a scrip without actually taking delivery of the stock<br />‘Badla’ system of transactions has been in practice for several decades in the Stock Exchange and Mumbai<br />
  4. 4. What is Quasi-hedging and Stock lending?<br />
  5. 5. Quasi-hedging and Stock lending<br />Quasi-hedging:<br />If an investor feels that the price of a particular share is expected to go up or down, without giving or taking the delivery he can participate in the possible volatility of the share<br />Stock lending:<br />If a stock lender wishes to short sell without owning the underlying security, he employs the Badla system and lends his stock for a charge <br />
  6. 6. What is Financing mechanism?<br />
  7. 7. Financing mechanism<br />If investor wishes to buy share without paying the full consideration, the financier steps into the CF system and provides the finance to fund purchase. <br />The scheme is known as "VyajBadla" or "Badla" financing. <br />An investor can either take the services of a badla financier or can assume the role of a badla financier and lend either his money or securities. <br />
  8. 8. How the Badla system works? <br />
  9. 9. Badla System<br />
  10. 10. Badla System<br />The Trade Guarantee Fund of BSE guarantees all transactions; hence, there is virtually no risk to the badla financier except for broker<br />Even if the broker through whom you have invested money in badla financing defaults, the title of the shares would remain with you <br />The shares would be lying with the "Clearing house<br />However, the risk of volatility of the scrip will have to be borne by the investor<br />
  11. 11. Remember: Whenthe market is oversold the CF rates are low or even reverse i.e. there is a demand for stocks and the person who is ready to lend stocks gets a return for the same<br />
  12. 12. Thank You!<br />Read More<br />Facebook<br />Twitter<br />Website<br />