Monday, April 11, 2011, Ibrahim BELLO

The report on the above subject and sourced from the NSE website has raised more questions than it sought to answer.

In the main, the intent and import would appear to be an attempt at providing a response or a reaction to the developments arising from the Transcorp/Heirs Holding matter – which in itself suggests that the NSE is seeking to re-affirm practice, provide an insight into the developments and use this as a learning opportunity.

Yet, the more pragmatic inference would be that the publication was a mistake and quite a revealing one.

It provides a paper trail that illuminates the developments leading to and arising from the subject of the communication.

A cursory review of the proposed(?) or existing procedure for block trades and the accompanying letters to BGL/Nova/SEC immediately raises the following questions:

1. What is the ‘new’ definition of block trade – Is it anything from 5% and would anything below it not qualify for a block trade?

2. A look at the heading of that NSE/MOIT001 Form – one is tempted to ask the question: Is it about Block Divestment or Cross Deals, or both?

3. In saying in the proposed procedure that the broker must disclose the “ultimate beneficiary”, is the NSE saying that there cannot be nominee trades or that investments cannot be held in street names?

4. Why create room for discretionary decisions?

5. The NSE/MOIT 001 says the stockbroker must declare “current holding of buyer as per CSCS account”. Is the exchange by this excluding holdings outside the CSCS? Is the market fully dematerialised? In any case, full dematerialisation would have made the reference to CSCS unnecessary.

6. What purpose were those letters to BGL and Nova supposed to serve?

7. The one to BGL requesting information appears to be an after the document. Note that as at the date of the letter the exchange issued a Press Statement saying all was well with the transactions?

8. The letters conveying approval were also not specific with regard to the subject of approval. What volume of shares was presented for approval?

9. Why did the exchange have to write BGL approving transactions that have since settled?

10. If we are to assume that the BGL letter to the exchange was for an approval, why did BGL deal before the approval?

It would appear that this piece of communication, as revealed by the draft letter to SEC gives the impression that all the transactions were done in one day? Perhaps, the assumption is that SEC has no use for details that the exchange could not consider.

A clarification of issues here will be helpful to the market.

GO TO REPORTS TO DOWNLOAD

BLOCK DIVESTMENT/CROSS DEAL REQUEST FORM FROM THE NSE

Source: Proshare