ISE managing director Joseph Massey told The Financial Express that till date the exchange had received Rs 5.4 crore from member exchanges against Rs 6 crore envisaged prior to the start of operations. The balance contributions will be collected in a phased manner, he added.

The exchange has submitted applications for the approval of its SGF and rules and regulations apart from the systems. The clearance of these along with the hardware and software is expected to be in place in a month. "We are planning to have an extended trial run to make sure that the system is fail-safe even if it means delaying live operations," Massey clarified. Tentatively, ISE is planning to go live by end-June this year.

For the purpose of monitoring trading activities oftraders and dealers of ISE, it has been decided to divide tradable securities into three groups. Group A will consist of 50 active securities, Group B will have 500 securities while Group C will comprise the balance scrips.

ISE's risk management system has fixed intra-day trading, gross exposure and cumulative loss limits at 33.33 times, 12.5 times and 0.5 times respectively of a trader/dealer's base minimum capital and additional capital.

According to the exchange management, these limits may be tightened if necessary in the interest of containing the overall market risk.

Besides, in Group C there would be limits on maximum outstanding quantity and gross exposure in an individual security and the group as a whole. Exposure monitoring in all cases will include unsettled positions of the previous settlement. Arbitration at ISE will be carried out both at Vashi (where the registered office and the mainframe computer will be located) and the regional stock exchanges. A two-tier arbitration system isenvisaged with the first level being an arbitration panel and the second being the arbitration committee.

ISE proposes to set up an arbitration panel and an arbitration committee at each regional stock exchange (RSE) and also at Vashi. As a result, the entire dispute redressal procedure will be decentralised with adequate overall controls and standards. Even the SGF, for which Sebi approval is pending, has in-built safety features already worked out. The SGF is proposed to be set up as a distinct trust with an initial corpus of Rs 5 crore for "scaled enhancement in relation to turnover".

The exchange has projected the annual turnover to rise from Rs 24,000 crore in the first year of operations to 192,000 crore in the fifth year. The SGF will be made up of the capital adequacy amount of traders (Rs 4 lakh) and dealers (Rs 10 lakh).

The capital adequacy amount would have 25 per cent cash component, 25 per cent in fixed deposits discharged in favour of ISE and the remaining in the form of securities with amargin of 30 per cent. In addition, each participating stock exchange would be required to maintain at all times an amount of Rs 10 lakh towards the Settlement Stabilisation Fund (SSF).

The SSF would be used to tide over temporary shortfalls in pay-in amounts at any exchange to ensure timely pay-outs. The trader who delays payments would be given a specified period to repay the shortfall amount (met by the SSF) with interest and penalty, failing which he would be declared a defaulter.

Accruals to the SGF corpus will take place on account of interest income on cash deposits and also from the allocation made out of the transaction fee charged to the traders/dealers. Initially, it is proposed to allocate Re 1 per lakh of transaction fees towards the SGF. The allocation would be progressively increased over time as turnover on the exchange picks up.

As an additional safety mechanism, ISE will go in for a comprehensive insurance cover against physical risks, fidelity risks, computer errors and crimes anderosion in the SGF due to errors made by traders and dealers.

It also plans to take a "top-up" cover for the SGF which will ensure that the corpus is always maintained at the desired level, irrespective of disbursements made out of the fund. This is expected to protect traders and dealers from losses arising out of introduction of fake/forged documents.