The badla system, which allowed transactions to be carried forward from one trading valan to the next, was banned by the SEBI in March SEBI was hoping. Q Is “badla” trading like derivatives trading? A: No. Badla is a mechanism to avoid the discipline of a spot market; to do trades on the spot market but not. the historical background to the introduction of badla in the Indian stock market, it is clear that this uniquely Indian system of forward trading in.

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The broker gives the money to exchange and the shares are transferred to B.

Badla (stock trading)

In any case they were not interested in the entire universe of listed stocks, in the first place. But of course, we would continue to maintain the fiction that we have a ban on forward contracts in public interest.

Was badla different from futures? After all, a forward trade is nothing but a trade where payment or delivery of scrips is effected at a future date. You can help correct errors and omissions. The trades were carried through stock exchanges and shares were only transferred in the name of the end investor once the payment was settled.

The lenders in this case used to get an interest payout. With proper framing of rules and regulations, chances of its traving would be reduced considerably; without incurring large efficiency losses associated with financial regulations.

Badla, as commonly understood, was not like a futures contract or a forward contract. A third explanation might combine elements from the first and second ones. RePEc uses bibliographic data supplied by the respective publishers.


Why has the Government been so finicky about not allowing anything but spot delivery? In the BSE, by contrast, index futures are more popular than single-stock futures. If you have authored tradong item and are not yet registered with RePEc, we encourage you to do it here. Gold extended its rally for the second consecutive week. Sampathkumar IF ONE goes into the historical background to the introduction of badla in the Indian stock market, it is clear that tgading uniquely Indian system of forward trading in stocks has lost its raison d’etre at the present juncture.

The New Year heralds an election season marked by yearning, anger, uncertainty — and above all, hope. In the aftermath of the ban, the Indian stock markets did not perform well. Published on March 11, Even though badla remains irrevocably banned, Indian investors seem to favour derivative products which effectively resemble badla trades. All trades in securities can be contracted only for immediate delivery or delivery in a trading cycle of 14 days since reduced to a week which was by an act of legal fiction, recognised as spot delivery.

One can do a lot of speculation in stocks. Perform a search for a similarly titled item that would be available. All material on this site has been provided by the respective publishers and authors.

One, controversial reforms are often smuggled through with a regulatory Trojan Horse. In this paper, these conditions are critically evaluated. A research paper by Asani Sarkar, published in The Oxford Companion to Economics in Indiafound that the market for equity-derivatives in India was flourishing.

This article is closed for comments. It helps with price risk management and facilitates effective competition.

In a single-stock futures contract, parties agree tradin exchange a specified number of equities in a company for a price agreed upon today the futures price or the strike price with delivery scheduled for a specified future date.


The birth of a youth brand This book excerpt outlines how saucy, edgy Fastrack was conceived tradnig of the Titan stable and evolved into a Views Read Edit View history. But the investor was supposed to pay the financer within a specified time.

Badla System: A Reappraisal

The badla system, which allowed transactions to be carried forward from one trading valan to the next, was banned by the SEBI in March Initially the Government, quite understandably, was reluctant. A few modifications are suggested. This difference between the two values is the interest as badla finance is treated as a loan from B to A. Two, it is in the nature of a regulatory structure that regulations remain in force long after the circumstances which gave rise to it in the first place have ceased to operate.

For long, forward trading in securities as in the case of commodities, was banned in the Indian market. In the circumstances, they were technically in violation of the law that bans all forward trading in securities quite apart from any penal consequences under the bylaws and regulations of the stock exchange. Due to delays in transmission of securities by post or remittance of funds under the country’s primitive system then in vogue, it happened that brokers could not fulfill their commitments to the stock exchange on the trade positions that they had contracted earlier.

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