Nse To Set Up Derivatives Panel

The National Stock Exchange, which has been in the forefront for the introduction of derivatives trading in the country, has its infrastructure in place to commence trading in three months time. NSE managing director R H Patil, in an interview, said a separate executive committee would be set up as a governing council for derivatives trading.

The exchange will take this proposal to the full board at its next meeting which is expected to be held in early-June. This will coincide with the finalisation of the accounts for the year ended March 1998.

The NSE`s next plan of action will be:

making a formal application to the Sebi for the commencement of derivatives trading

constituting an executive committee as the governing council

finalisation of report prepared by the internal group with Institute of Chartered Accountants of India on proper accounting and disclosure standards

holding tests as part of certification programme for sales personnel (working at broker/dealer offices). The model syllabus has already been prepared and submitted by the NSE to Sebi.

Eligibility criterion and trading interest: The NSE is confident that the Sebi-prescribed minimum networth for a clearing member (of Rs 3 crore) and the minimum trading interest from 50 members from an SE will be easily met with.

According to Sebi, the entry norms for the trading member will be lower. Patil said that the exchange had earlier prescribed a Rs 3 crore networth for its trading members and at least 200 members had shown interest.

Surveillance system: Margins for derivatives trading will be collected on a gross basis and client-wise.

This is different from the existing system at the cash market where it is collected on a net basis.

The margins will be collected upfront - before the commencement of the trade. Further, the mark to market margin will have to given prior to the commencement of next day`s trading. ``The safety at the markets will thus be strong,`` says Patil.

Inspections: The National Stock Exchange will carry out an annual inspection of all its members operating in the derivatives segment.The exchange is already conducting yearly inspection of 20 per cent of its trading members.