Mumbai, Feb 27: The Inter-Connected Stock Exchange (ICSE), which plans to commence operations from May this year, is planning a broad-based index of 100 stocks which will be called ISE Index.The index will represent the national character of the exchange and will be constructed internally. ICSE is also planning to implement the revised carryforward system during the second phase which will start in January, 1999.
The regional stock exchanges, which are a part of ICSE, are interested in taking part in the revised carryforward system currently in place at the Bombay Stock Exchange (BSE).
According to sources, the index will try to represent heavyweight stocks of each regional exchange that has joined the ICSE. The exchange plans to go live in June with this index. Broadly, the index will be based on the market capitalisation of the stock concerned. The ICSE will also consider using some scrips which do not qualify in terms of market capitalisation but are heavily traded at the respective regionalexchanges. ICSE will initially construct the index internally, but later, they might give it to some external agency.
Crisil had earlier approached the exchange to offer their services in this regard. The exchange is also trying to access the `impact cost' structure of the index. The impact cost of each stock generally measures the liquidity of the stock. The volatility in the scrip is directly proportional to the impact cost. ICSE is planning to build an index which is not too volatile. Above all, the index will also try to cover all the major industry sectors. The exchange officials are currently designing the index basket and also deciding how much weightage to give each industry or regional exchange. THe exchange will hold a mock trading session on May 1.
Sebi has already given an in-principle approval to the exchange on certain conditions. This includes a capital adequacy monitoring system, risk-management and surveillance systems. The risk-management system will be completely computerised withconstant vigilance on parameters like prices and volumes.
This system will be located centrally and also at the regional stock exchanges. The exchange will also maintain information on the various companies listed on all the 14 regional stock exchanges. They will also have a clearing system in each of the regional exchanges which will look into the delivery and the bad deliveries.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
