The CSE committee decided to reduce the settlement cycle for `A' group to seven days so that it coincides with the `B' group cycle beginning on Friday latest by August 21, 1998. As a corollary, it was also decided to make a formal request to the Securities & Exchange Board of India (Sebi) for approval of its application for modified carryforward system, the trading module for which is already in place.

CSE is the only major bourse that was resisting the introduction of a weekly cycle on the plea that it would drastically reduce business volumes and kill arbitrage opportunities. Its reluctance had stalled the introduction of a modified carryforward system as Sebi did not approve CSE's carryforward proposal although it wassubmitted months back.

Sebi was aware that CSE was in no particular hurry to have a carryforward mechanism installed as it already had an age-old informal system which allowed members the facility to trade unofficially. Effectively, Sebi's insistence on a weekly cycle and CSE's reluctance matched in intensity resulting in status quo.

The issue of a weekly cycle acquired a new-found urgency probably because of bad press which it was provoking and which had the potential to tarnish the regulator's reputation for acquiescing into CSE's informal system of carryforward.

Partly, it was also the result of the market volatility in the post-US sanctions phase which exposed the weaknesses of the major bourses and the regulator in containing market risks, knowledgable sources explained.

With a large volume of trades going unreported on CSE, there was no way of estimating the extent of risk involved in a volatile market.

CSE is also seeking an expeditious clearance of its expansion plans to open up new businessavenues in urban and semi-urban areas which are outside the exchange's ambit. This, according to the committee, would "mitigate the difficult position the exchange and its members would face consequent upon the process of change over" to the weekly cycle.

The meeting also discussed the inspection report of Sebi which was bitterly critical of the surveillance function at the exchange. The draft reply of the exchange was placed for the board's consideration.