Proprietary traders, or brokers who trade for themselves, extended their existing bank guarantees (BGs) and tapped the corporate bond market to sustain their equity market activity to cope with the Reserve Bank of India's (RBI) recent curbs on bank funding.
This prevented a striking impact on prop volumes, said Sriram Krishnan, chief business development officer of the National Stock Exchange (NSE), during the exchange’s second-quarter earnings call.
The official was responding to an analyst's query on the "tumultuous" quarter that impacted NSE's sequential earnings.
The RBI circular (on bank funding for prop traders) was scheduled to go live on 1 April this year but was deferred by three months and took effect from 1 July. Prop traders used this postponement to their advantage.
"A number of market participants, particularly brokers getting impacted potentially have extended their prevailing BGs by several months, as much as they could, and some have raised money by issuing corporate bonds in the last few months," said Krishnan in response to the analyst's query.