MUMBAI, May 7: The interconnected market system, promoted by Indian Stock Exchange Services Corporation (ISESC), will have a separate trade guarantee fund (TGF) existing simultaneously with the one maintained by regional exchanges.

The steering committee meeting of the Federation of Indian Stock Exchanges (FISE) held on May 3 at Jaipur decided against having a combined TGF for interconnected and regional markets. The meeting held a view that a separate TGF would enable ISESC to convert it into a clearing corporation at a later stage. Also, maintaining a separate fund would require separate risk management systems for both national and regional markets. This will require less complex software in manning the system.

The meeting also finalised TGF's structure, and it will be presented to the Securities and Exchange Board of India senior executive director OP Gehrotra on May 12, sources said.

Separate funds will be maintained by each participant stock exchanges for the regional and inter-connected market, with each one being administered separately. The contribution to the national market segment will be consolidated into a single fund, and will be managed separately by ISESC. The member stock exchanges will earmark a portion of the existing funds lying with them for the interconnected market, which may also be augmented by bringing in extra funds. The size of the TGF for the interconnected market is yet to be finalised. It will mostly depend on the number of members participating in the expanded market. As of now there are twelve stock exchanges who are committed to ISESC, while some major bourses like Calcutta and Kanpur are about to join the interconnected market system. Moves are afoot to rope in Madras and Delhi stock exchanges. ISESC officials will make a formal presentation to the Madras Stock Exchange on May 9 on the advantages of joining the interconnected market system.

TGF will constitute a portion of the base capital of brokers lying with the member stock exchanges plus additional contribution from broker members. From broker members it plans to charge a refundable initial contribution of Rs 5,000 each and a continuous contribution based on turnover (Rs 1.50 per Rs 1 lakh of turnover, subject to a minimum of Rs 7,500 per member every year).

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.