Among the directives was one which pertained to exposure limit for brokers. ``The upper limit for the gross exposure (aggregate of scrip-wise outstanding net purchases plus net sales) of the member broker of the stock exchange has been fixed at 20 times of his base minimum capital and additional capital. The exchanges are free to set up stricter limits. This is in addition to the present capital adequacy and other margin requirements,'' stated the SEBI circular signed by the then senior executive director in charge of secondary markets, OP Gahrotra. This department was susequently handed over to executivedirector, Pratip Kar.

``The following decisions should be implemented by the stock exchanges expeditiously,'' the notice added.

However, the BSE announced its decision to begin implementing the 20 times exposure limit only on July 24, six months after the issuance of the SEBI directive.

In fact, the exchange has not extended this exposure limit to carry forward business transacted by a broker and sought clarification from SEBI on whether carry forward exposure should be brought within the ambit of the 20 times exposure limit. SEBI is yet to reply to these clarifications sought by the exchange.

SEBI executive director incharge of secondary market, Pratip Kar was however not available for comments. When contacted, executive director of the BSE, RC Mathur, justified the exchange's stand for seeking such an exemption for carry forward business. ``SEBI has stipulated a 10 per cent margin on carry forward business while BSE is imposing 15 per cent margin which takes care of excessive building ofpositions,'' explained Mathur.

The six months gap in implementing the directive is crucial as during this period, the exchange was witness to a huge build up of positions in a few scrips like Sterlite, BPL and Videocon.

Following severe bear hammering, a large number of brokers were trapped with open positions and fell short of meeting their delivery requirements.

However, a massive bail out exercise helped these brokers tide over the problem and the exchange was able to ensure that all its brokers met their obligations, with only a few brokers being declared defaulters.

BSE's notice to its members on July 24 states: ``The members of the exchange are hereby informed that SEBI has directed the stock exchanges to prescribe an upper limit on the gross exposure of members... The exchange has made certain representations to SEBI with regard to the limit of 20 times on the gross exposure of Type I members in A group scrips where carry forward of business from one settlement to another is permitted. WhileSEBI's clarifications are still awaited, it is felt imperative to commence monitoring of exposures of members with immediate effect.''

``It has therefore been decided that for the time being, the gross exposure of Type I members in B1 and B2 group scrips, and Type II members in A, B1 and B2 group scrips on any day during a settlement would be restricted to 20 times of their base minimum capital plus additional capital deposited with the exchange,'' the notice adds.

``The date of implementation of this monitoring through the BOLT system would be advised to the members in due course. Pending development of the software to monitor the gross exposure of the members, it is proposed to manually monitor the gross exposure of the members on a daily basis. The members exceeding the limit would be advised by the surveillance department to reduce their exposure or alternatively deposit additional capital to cover their exposure in excess of the limit in this regard,'' the notice states.