Bse New Fund For Avoiding Defaults

The BSE governing board, in a step towards bridging the gap between stringent risk management and the trade guarantee fund (TGF), has approved a separate fund termed 'The Stock Exchange Brokers Contingency Fund'.

BSE president MG Damani says the main objective of the fund is to make temporary refundable advance to the members for tiding over a temporary mismatch in his fund flow.

The fund will act as a cushion for temporary mismatch in fund flow for brokers. We do not intend to touch the trade guarantee fund for small shortages of fund. This will help the TGF to grow faster with the continuous contribution from members," Damani told Business Standard.

As per the guidelines, the stock exchange may from time-to-time contribute to the fund as per the governing board's discretion. All the active members will contribute a non-refundable amount of Rs 1000 each once the fund comes into force and newly elected members shall on election pay Rs 2.5 lakh each to the fund.

Further at the end of each settlement, all the active members shall contribute 0.00025 per cent of his turnover during the concerned settlement which will be accounted as continuous contribution, which is non-refundable.

The fund, with an initial corpus of Rs 9.51 crore and having a maximum advance limit of Rs 50 lakh, will be managed by a committee comprising of the president, executive director, vice-president, honorary treasurer and three non-elected directors.

The exchange set up the Rs 172 crore trade guarantee fund with effect from May 12, 1997 to guarantee settlement of bonafide transactions of members of the bourse.

The exchange has collected an aggregate base minimum and additional capital of Rs 146 crore from members as on March 31, 1997 as against average of aggregate settlement liability of about Rs 220 crore or so.