CALCUTTA, March 16: The settlement guarantee fund (SGF) of the Calcutta Stock Exchange (CSE), which is expected to become operational early next month, will not entertain "unusual" trades, among others. According to the regulations finalised at the last board meeting of the exchange, the liability of SGF would cover all transactions put through C-Star barring negotiated deals, crossed deals (where the buyer and seller are clients of one broker), shares which are inactive in nature, unusual trading/delivery, exchange of credit advices and bad delivery.Under the rules of the SGF, inactive shares are those "which have not been traded on the C-Star for the last 15 trading days from the relevant date, having a cumulative trade volume of less than the stipulated number of shares, unless so permitted by the exchange authorities." The exchange is, however, yet to define "unusual" trading/delivery. When contacted, the executive director of CSE, Tapas Datta, said unusual trades basically meant those transactionswhich are intended to defraud the exchange and entered into between parties acting in collusion. These trades would be clearly defined in due course by the exchange.
SEBI has asked the exchange to raise the corpus of the SGF to Rs 100 crore from the proposed Rs 53 crore. The corpus of the SGF will be raised by transferring Rs 5 crore from the current net income of CSE starting 1998-99. The SGF rules of the CSE also prescribe that the defaulters' sub-committee, which will administer and monitor the fund, will try to ensure that the corpus of the fund (including money, assets and property) is not less than the minimum value which is "the initial corpus at any point of time, or 75 per cent of the closing value of the fund as on date immediately preceding March 31, whichever is higher."
If the fund corpus drops below the minimum value, the defaulters' sub-committee will, within two weeks of the fund dropping below the minimum level, take steps to restore it to the minimum level. These steps could includecontributions from all members, equitably or otherwise, or by way of contributions from the exchange or in any other manner as is deemed fit by the committee.
As for the method of payment from SGF in the case of defaults, the rules prescribe that the order of priority for appropriations from the fund will take into consideration an amount that may be paid in the form of margin retained by the exchange for the purpose of clearing and settlement.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
