MUMBAI, July 15: The Securities and Exchange Board of India (Sebi) and stock exchanges have launched an exercise to determine the computation of the previous closing price in case of stocks which have not been traded for a reasonably long period of time.

Stock exchanges currently have a system of daily and weekly price bands which is the range within which a share price is allowed to fluctuate. Currently, the previous day's closing price is used to determine the price band. However, there are shares which have not been traded for long periods and it thus becomes a problem to determine the price on which the band should be imposed.

It was felt that for these shares, either the last traded price at any other stock exchange could be taken into account or an average price formula could be worked out. The issue will be taken up in detail at the next meeting of the inter-exchange coordination group.

The matter was discussed at length on Monday at the inter-exchange coordination group's meeting. In the meeting, Sebi also asked all stock exchanges to work out the modalities for placing a gross exposure limit on brokers on the lines of the practice currently adopted by the National Stock Exchange. Sebi has also directed the Calcutta Stock Exchange to immediately collect margins worth Rs 6 crore due from its members.

At a meeting with the members of the inter-exchange coordination committee here on Monday, the regulator was of the opinion that an additional exposure control measure would serve to ensure greater safety in the market.

All exchanges are presently implementing the capital adequacy norm which gives members the authority to transact business to the extent of 33 1/3 times his networth. In the case of the NSE, the bourse has in addition to this a gross exposure limit which does not allow a member to have an outstanding position of more than seven times his base minimum capital. According to Sebi sources, the Bombay Stock Exchange executive director, RC Mathur, said that the exchange has a kind of flexible mechanism to determine if any member was trading more than his capacity.

"The Bangalore and National Stock Exchanges already have such a system in place and we have asked other exchanges to work out the modalities for introducing the same system at their bourses. We have not imposed any specific limit on the exchanges as of now and have asked them to get back to us with their suggestions," said a senior Sebi official.

Stock exchanges are believed to have collected over Rs 400 crore in the form of margin money in the current and the earlier settlement. However, there has been a shortfall in margin collection at the Calcutta Stock Exchange and Sebi has directed the bourse authorities to take the necessary steps.

The meeting held on Monday had been convened to take stock of the situation in the wake of the recent volatility on the stock markets. It was felt that the margin collection systems in place are adequate and do not need any changes for the time being.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.