PUNE, July 8: The Securities Validation and Guarantee Programme (SVGP) developed by SignAssure Services (India) Ltd in alliance with Kemark of the USA could also solve the current impasse over the indemnity bond issue, feels RH Patil, managing director of the National Stock Exchange (NSE).

The programme is likely to be accepted by the National Stock Exchange before the July 31 deadline, when National Stock Exchange members have to furnish indemnity bonds. Patil said the National Stock Exchange has clarified that it would hold the member responsible for introducing bad paper while members want insurance cover, which this scheme offers. The Securities Validation and Guarantee Programme, a systems solution to bad deliveries, offers the protection of an insurance cover since it covers the value of each delivery.

Moreover, the limit is not per broker but value per delivery and the upper limit for the insurance cover is Rs 1 lakh per market lot per delivery. While the cost is not seen as a major hurdle, with Patil saying that the insurance cost is worth the scheme, the infrastructure will have to be created by SignAssure. Ajay C. Mehta, director, SignAssure Service India, pointed out that the hold up was not due to the reluctance of brokers or stock exchanges but because they were awaiting the final report of the R Chandrashekhar Committee which would include the views of the various industry associations. Once the report is submitted, which is expected shortly, they will push for the implementation of the Securities Validation and Guarantee programme, since they have already made their presentations to all the major exchanges. While he declined to reveal the costs involved in the setting up of the infrastructure, he said the company expected to get a return on investment within four to five years.

Pointing out that the Securities Validation and Guarantee Programme would facilitate intra- as well as inter- exchange trades, the latter facilitating arbitrage, it would also protect National Stock Exchange brokers who face the liability of sub-brokers trades.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.