Merrill Lynch rejigs PD business

NEW DELHI: Merrill Lynch is restructuring its primary dealership business for government securities and Treasury Bills in India under a separate subsidiary. Till now, DSP Merrill Lynch has been engaged in primary dealer (PD) business for G-sec and T-Bills, along with other financial service activities. This is pursuant to revised norms for business diversification for PDs in the country.

DSP Merrill Lynch has set up DSP Merrill Lynch Securities Trading, a wholly-owned subsidiary which will carry on PD activities. Last year, RBI had allowed stand-alone PDs to diversify activities. As per RBI norms circulated in July 2006, PDs need to bifurcate their operations into core and non-core.

The core activities include dealing, underwriting and broking services in G-sec, corporates, PSUs, FI bonds or debentures; dealing in interest rate derivatives, lending in call/term/repo/CBLO market, investment in commercial paper, certificates of deposit, security receipts and debt mutual funds.

Non-core activities classified by the RBI circular feature investment or trading in equity and equity derivatives market, investment in units of equity-oriented mutual funds, underwriting public issues of equity, M&A advisory, portfolio and private equity management services.

However, the central bank had set certain stipulations. It had disallowed PDs to set up or step down subsidiaries and had indicated that those PDs who already have subsidiaries have to restructure the business so as to form a step-down subsidiary for the PD business.

vivek.sinha@timesgroup.com