The imminent collapse of US futures broker Refco is creating nervousness in Indian markets. The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) on Saturday advised Indian entities of Refco Inc not to increase their exposures in the capital and derivatives market segment till the implications of the news pertaining to Refco Inc’s solvency are factored.Refco Inc, the futures broker under federal investigation for securities fraud in the US, sped toward collapse last Friday as regulators barred its owners from taking out money. Standard & Poor’s said a debt default may be imminent.The Indian entities of Refco Inc — Sify Securities India Pvt Ltd and Refco Capital India Pvt Ltd — have been advised not to increase their exposures in both the market segment as an interim measure till the implications of the news pertaining to the international entity are factored, a release said.It is understood that Refco had issued participatory notes (PNs) to funds and investors who wanted to invest in India. ‘‘Investors who got PNs from Refco might have sold in India in the last few days. Sebi should regulate the PN route more closely,’’ said a BSE dealer.The exposures of these Indian entities to the exchanges are covered by the collaterals as available with the exchange or clearing house, the exchanges said. The Sensex had fallen by 339 points in the last two days amidst heavy selling by FIIs.Meanwhile, Refco Securities, the company’s biggest US unit, ‘‘initiated the process of unwinding proprietary and client positions’’ and won’t seek new business, Refco said in a statement in the US. S&P cut Refco’s credit rating for the third time in four days and said ‘‘a payment default is highly likely.’’Refco’s disclosure on October 10 that former CEO Phillip R. Bennett covered up $430 million in bad debts prompted customers to abandon the company, threatening its solvency. Last Thursday, Refco placed a 15-day moratorium on all business at its Refco Capital Markets Ltd and hired Goldman Sachs Group Inc as a financial adviser.The SEC on Friday suspended withdrawals of equity capital from Refco Securities and Refco Clearing Llc for 20 days. Such withdrawals ‘‘may be detrimental to their financial integrity or unduly jeopardize their ability to repay customer claims,’’ it said.
