Mumbai, July 8: The National Stock Exchange authorities have rejected the demand of its members to bring back the gross exposure limit to 10 times of the base minimum capital. The exchange had lowered the limit to seven times in March following the political instability at that time which had led to wild swings in the market.

Some members feel that the measure to reduce the exposure limit was taken owing to the phase of uncertainty that the market had been plunged into following the removal of support by Sitaram Kesri to the Deve Gowda government.

They felt that now that the political instability is not so grave and the fact that the market is going through a bull run, the exchange should restore the earlier gross exposure limits.

NSE authorities have, however, rejected the demand of the members on the ground that political instability and volatility is still prevalent in the market.

"Moreover, the fact that the exchange has touched the Rs 3000 crore daily turnover mark just goes to show that the 7 times limit is not holding up any of the members to trade more in a bull market. To ensure the safety of the market we have decided not to change the 7 times limit that we had prescribed earlier," the authorities have informed the members.

The National Stock Exchange top brass feels that reducing the limit augurs well for its members as it makes them more immune from incurring heavy trading losses. "It is for this reason that there was no payment crises in those days of high volatility. We want the same situation to persist," said an exchange source.

The exchange currently allows its members to have a net outstanding of not more than 7 times of the base minimum capital at any given point of time."While on the one hand we have started closer monitoring of members' positions so that we can warn them in advance and thus stall any payment crises, it is also imperative that members themselves trade only to the extent which enables them to avoid any risk," said the NSE source, while justifying the decision of the exchange to maintain status quo on the gross exposure limits.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.