MUMBAI, July 14: In a bid to ensure safety in the market operations, the Securities and Exchange Board of India (Sebi) has asked the stock exchanges to work out the modalities for placing a gross trading exposure limit on brokers on the lines of the practice currently adopted by the National Stock Exchange. Sebi has also directed the Calcutta Stock Exchange (CSE) to immediately collect margins worth Rs 6 crore due from members.

At a meeting with the members of the inter-exchange co-ordination committee here on Monday, SEBI officials were of the opinion that an additional exposure control measure would serve to ensure greater safety in the market.

All exchanges are presently implementing the capital adequacy norm which gives members the authority to transact business to the extent of 33 1/3 times the networth of the member. In the case of NSE, the bourse in addition to this also has in place a gross exposure limit which does not allow a member to have an outstanding position of more than seven times his base minimum capital.

According to Sebi, the Bombay Stock Exchange executive director said that the exchange has a kind of flexible mechanism to determine if any member was trading more than his capacity.

"The Bangalore and National Stock Exchanges already have such a system in place and we have asked other exchanges to work out the modalities for introducing the same system at their bourses. We have not imposed any specific limit on the exchanges as of now and have asked them to get back to us with their suggestions," Sebi officials said.

Stock Exchanges are believed to have collected over Rs 400 crore in the form of margin money in the current and the earlier settlement. However there has been a shortfall in margin collection at the Calcutta Stock Exchange and Sebi has directed the bourse authorities to take the necessary steps.

The meeting had been convened to take stock of the situation in the wake of the recent volatality on the stock markets. It was felt that the margin collection systems in place are adequate and do not need necessitate any changes for the time being.

The exchange authorities and Sebi also discussed the issue of what should constitute the previous close in case of stocks which have not been traded for a reasonably long period of time.

Stock exchanges currently have a system of daily and weekly price bands which is the range within which a share price is allowed to fluctuate. Currently, the previous closing price is used to determine the price band. However, there are shares which are not traded for long periods and it thus becomes a problem to determine the price on which the band should be imposed. It was felt that for these shares either the last traded price at any other stock exchange could be taken into account.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.