Fise Plans On-Line Monitoring

The Federation of Indian Stock Exchanges (Fise) will be installing an on-line broker-surveillance and risk-management system. It will also have a software mechanism to detect `circular trading' among brokers.

The federation, a conglomeration of 14 regional stock exchanges, is set to go live in September this year, subject to the Securities and Exchange Board of India (Sebi) approval.

The risk management systems at all other automated stock exchanges in the country evaluate the brokers' trading limits, gross exposure and mark-to-market requirements only at the end of every trading session.

"However, Fise's system will monitor these requirements live and will also initiate on-line action against brokers violating these limits,'' according to Indigo Technologies' senior consultant V Santhanam.

 

Indigo Technologies is doing the exchange automation for Federation of Indian Stock Exchanges.

Every stock exchange specifies a maximum trading limit on brokers depending upon their capital base. Currently, a broker is suspended at the end of the day, if his trading activities exceed the prescribed limit.

"The software at Fise will automatically suspend a broker the moment trading exceeds the prescribed limits after giving him a three-level warning.

"His pending orders will also be killed. All this will happen on-line and the exchange need not wait till the end of the trading session,'' Santhanam said.

Similarly, the Fise software will also monitor gross exposure and mark-to-market requirements of each broker on-line and initiate live corrective measures when a broker exceeds these limits.

When a broker exceeds his gross exposure or mark-to-market limits, the Fise software suspends him from executing normal trades. However, he is allowed to square off his outstanding positions.

Indigo Technologies has also designed a software mechanism for Fise through which circular trading can be detected.

In recent times, though Sebi has taken a tough stand against circular trading, brokers have managed to get away in some cases.

"However, the software developed for Fise has been tested and is expect to detect most cases of circular trading," Santhanam said.