The Securities & Exchange Board of India (Sebi) yesterday formally cleared the introduction of modified carry-forward system on the Calcutta Stock Exchange (CSE). Following the decision to change over to a weekly settlement cycle for the specified group from August 21, 1998, the CSE governing board had sought Sebi approval to implement the carryforward system at the bourse.
"The bourse received the approval from Sebi for the introduction of modified carry-forward system on the exchange subject to certain conditions," said Kamal Parekh, the newly elected CSE president, while addressing newspersons here yesterday. To set the ball rolling, CSE is in the process of installing a customised surveillance system as per the Sebi directives under its Stock Watch programme for all bourses and hopes to introduce the carry-forward system within this month.
Prior to the introduction of the carry-forward system, the exchange will have to monitor the gross exposure limit of brokers on a real time basis and intra-day trading limits and ensure that the margins are within the limits as per the Sebi directive, added Parekh. "Various other essential pre-requisite laid down by Sebi will also be complied with," said CSE vice-president Vivek Mahajan.
Significantly, CSE was the only bourse that was against the introduction of a weekly cycle on the plea that it would reduce business volumes and kill arbitrage opportunities. Its reluctance had stalled the introduction of a modified carry-forward system in accordance with the G S Patel Committee stipulations.
"The introduction of carry-forward system at the exchange will increase the business volume substantially as it will provide the much needed hedging mechanism to the brokers," said Parekh. Having obtained the Sebi approval for the carry-forward system, the CSE top brass is now awaiting the Sebi approval for the expansion of C-STAR network in urban and semi-urban areas. "We hope to obtain the approval soon,"added Parekh.
In a bid to enhance business volumes and garb opportunities from foreign institutional investors, the exchange entered into an agreement with the Bombay Stock Exchange on May 31, 1997, and finalised the modalities of the reciprocal extension of BOLT system to Calcutta and the Lyons Range's C-STAR to Mumbai. "We already have about 15 BOLT terminals installed in Calcutta," said Mahajan. CSE also proposes to enter into similar memorandum of understanding with other bourses like the Delhi Stock Exchange to set up its terminal outside West Bengal.
