T-bills and Badla Trading

[madeeha]

what are treasury bills and badla trading

[accountant1]

BADLA is financing which is only available in pakistan stocks market. ) ... in this world )
The new name of badla is CFS (CONTINUOUS FUNDING SYSTEM) now a days..
Badla is a mechanism to carry forward a speculative trade. It is also known as the Carry Over Transaction (COT).
Badla Finance in simple terms means putting money on interest. The mechanism is very easy for the stockbroking society but complex for the ordinary investor. History says Badla was born in the nineteenth century. Then, till today, the purpose has remained the same, the mechanism has hardly changed but the process has. These changes have made Badla Finance safer, more secure and transparent to clients besides a fair business practice for the stockbrokers.

Mechanism of BADLA
A person buys shares with the intention to make profits but without blocking money. The purchase at the end of the settlement is carried forward to the next settlement. Here is where the client / Badla financiers steps in. The financier's block the money for taking delivery of shares purchased by the speculators. He gives the money to the exchange for shares bought. For this facility the speculator pays interest to the financiers. This interest is known as Badla.

BADLA financing is done through Stock Brokers
The financier gives money to his broker who in turn, hands over the same to the Exchange. The shares are retained by the Exchange under custody, on behalf of the broker's client. Since the shares and the money lie with the Exchange, broker's risk is also eliminated.
Example If "A" has purchased 1000 shares of MCB @ Rs. 50 per share in Settlement 1, he has to take delivery from "B" who has sold the same. "A" would like to carry forward his position to the next settlement by letting "C" (Badla Financier) take delivery at the prevailing interest rate.
In settlement 2 "A" will have to purchase the shares at a higher badla rate as determined by the Exchange. If the Badla was Rs. 0.20 in settlement no.1, "A" will have to buy MCB @ Rs. 50.20 per share from "C".
The difference in purchase price in settlement no.1, and sale price in settlement no.2, is the earning for the Badla Financier.





*A careful study of economics usually reveals that the best time to buy anything is last year
*Opportunist- a person who starts taking bath if he accidentally falls into a river
*Atom Bomb is an invention to end all inventions
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[sumaaan]

T-Bills are non-interest bearing discount bonds that are sold by the govt. at discount to par value but zero-in on the face value as the time of maturity approaches.

[seesamad]

WEll said accountant 1 , I totally agreed with your statement
Bye

Kind Regards !

[madeeha]

but still confused with badla trading

[sumaaan]

COT, i.e Badla, is trading with more money than you actually have with the help of your financer (eg brokerage house) and you pay a fixed sum or in some cases percentage in return.

[accountant1]

for example .If i have 100000 and i am client of any sotck broker,,,, and i want to used badla trading ( which is very riski).my broker allow me to buy shares of 500000( normaly 20% margin is allow in stock exchanged ). i just have to pay intrest on that borow money, intrest rate is changed every day..
if i borow money on tuesday or friday then i have to pay badla intrest of next 2 days also .

*A careful study of economics usually reveals that the best time to buy anything is last year
*A diplomat thinks twice before saying nothing
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