BSE to up Trade Guarantee Fund

MUMBAI, July 13: As a precautionary measure to tide over payment crisis in the future, the Bombay Stock Exchange (BSE) has decided to double the contribution by member brokers to the Trade Guarantee Fund (TGF) and also increase the maximum amount of compensation payable under the Customers’ Protection Fund to Rs three lakh from Rs 2.25 lakh. The exchange was almost forced to withdraw money from the TGF in the recent payment crisis when several brokers defaulted on their payments.

The corpus of TGF is pegged at Rs 315 crore of which Rs 115 crore is held in the form of cash and the rest in the form of bank guarantees and exchange approved securities of blue chip companies. Contribution to TGF has been increased to Rs 1.50 for every Rs one lakh of gross turnover. The maximum CPF compensation would be in respect of any single customer claimant. BSE president J C Parekh said the purpose of the CPF is to compensate members of public who invest and deal in securities through the BSE in respect of their claimsagainst defaulter members. This measure will substantially enhance the protection provided to the investors by the exchange, he said.

As of June 30, 1998, the total corpus of CPF, introduced in 1987, amounted to Rs 58.40 crore.Every member broker contributes quarterly to CPF at the rate of Re one for every Rs 10 lakh of the turnover. BSE allocated 2.5 per cent of the listing fees received and the entire amount of interest earned from the deposits collected at the rate of one per cent of the capital raised.