Man Ranjit UBANGALORE, June 21: The much-touted connectivity between the Bangalore and Coimbatore stock exchanges has run into rough weather. The plans of linking both the bourses by July now appear unlikely as the Securities and Exchange Board of India (SEBI) has insisted on the pre-requisite of a Settlement Guarantee Fund (SGF) before any such move.

The regulator has imposed this conditionality through a recent directive in order to guarantee settlement of all transactions of the members of the exchange inter-se through the bourse. The SGF will undertake to fulfil the commitment of its members who fail to honour their settlement requirements.

The order has come as a spanner in the works of the Bangalore Stock Exchange (BgSE). After completing all formalities for connectivity the bourse was all set to commence the linkage. Now with the mandatory requirement of SGF, the bourse is faced with a piquant situation of generating funds.

What has added to the exchange's cup of woes is that the requirement comes at a time when brokers are reeling under dismal market conditions and business. SEBI had stipulated that the SGF corpus should be funded through free reserves and members' contribution. Apart from this, the corpus should also have a regular income.

In the case of the BgSE the approximate cost of the SGF is put in the region of Rs 2-4 crore. The BgSE top brass is currently holding a series of discussions to sort out the issue. Though the modalities have not yet been finalised, the bourse is also mulling over some members' suggestion that BgSE dispose of its premises at Infantry Road.

The exchange had acquired this property some time back for its future plans. The proposal may not, however, cut much ice as property rates are currently depressed. According to real estate sources, at best the property may fetch something around Rs 3 crore. Another factor deterring such a move is that this is the only real asset that the bourse has to cash against future exigencies.

The members on their part are not very enthusiastic that they have to cough up more money. Many brokers are very particular that they would do business only at BgSE and not at other bourses. ``We are not making much money as it is. So why should we pay additional amounts to trade at other bourses,'' opines a leading BgSE broker. Exchange officials on their part feel that the situation will be sorted out soon. They are considering a series of steps including collecting money from brokers through instalments. A formal decison will, however, have to be taken by this month-end, they say. The bourse is also planning steps to curb bad deliveries.

This is particularly so since there has been a rise in the number of broker defaults at the bourse. Although there is a system whereby the bad deliveries are covered from the bourse funds many members are of the view that the fund is depleting steadily.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.