Millennium Post

Bourses hold back profit transfer to Settlement Guarantee Fund

Three national stock exchanges — NSE, BSE and MCX-SX — have held back transferring 25 per cent of profits to their respective settlement guarantee funds, pending views of a Sebi-appointed expert panel on this issue.

Bourses are required to maintain a settlement guarantee fund (SGF) as a cushion for any residual risk, and it works like a self-insurance mechanism in the event of a trading member defaulting on settlement obligations.

Market regulator Sebi last year made it mandatory for all the stock exchanges to transfer 25 per cent of their annual profits every year to a fund to guarantee settlement of trade of the clearing corporation which clears and settles trades executed on that bourse.
Following opposition from some quarters to this requirement, Sebi later set up an expert committee to look into the norms for adequacy of the core corpus of the  settlement guarantee fundand Trade Guarantee Fund (TGF) and its sourcing, including transfer of profits by the stock exchanges to such funds.

Pending the recommendations to be made by this panel, none of the three exchanges has made any transfer of profits to their respective SGFs for 2012-13, even as all of them have posted profits for the year, totalling more than Rs 1,000 crore.
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