The exchange has also proposed that each trader or dealer can have a maximum gross exposure limit of Rs 50 lakh, which is 12.5 times of the capital deposited by trader. For trading on ISE, the minimum capital adequacy of Rs 4 lakh is required.

"The net exposure of any trader or dealer is the difference of his or her net purchases and net sales. A prudential multiple of the capital adequacy amount will be considered as the net exposure limit", said the managing director of Inter-connected Stock Exchange (ISE), Joseph Massey.

The exchange which is grappling with the problem of uniform settlement. A decisionon this is expected by the end of the month and is likely to commence operations after Sebi takes a view on uniform settlement.

"ISE proposes to have an insurance policy for SGF so that no future in-flows are required from traders or dealers to replenish this fund in case of default. The SGF is likely to be higher depending on the number of traders or dealers joining the ISE", he added.

In addition to the proposed SGF every participating exchange would be required to maintain with the ISE a settlement stabilisation fund (SSF) of Rs 10 lakhs to meet temporary exigencies in pay-in so that there is no delay in declaration of pay-out. The SSF will form a part of SGF.

"Apart from this the SGF would be formed out of the capital adequacy maintained by traders with the ISE. The deposits and contributions to this fund is besides the contribution to traders at their local exchanges", said Massey.

The exchange proposes that it will not permit a cumulative loss (mark-to-market loss as well as trading loss) tocross 50 per cent of the capital adequacy amount, in the initial stages. Any further trading after reaching this limit will be possible only after the appropriate loss margin has been deposited in cash.

According to Massey as there will be more than 14 exchanges participating on ISE there will be a single price at which a particular scrip will be bought or sold which would be called the best price. The price will be determined in the following manner. Say, for example, on the buy side there are 14 different prices that have been quoted to buy the Reliance scrip. The best buy price would be the highest price at which any person is willing to buy.

Vice-versa, on the sell side among the different sell-prices mentioned the lowest price at which a person wants to sell would be the best price. Thus, a single scrip price would be seen on the screen.

Every exchange will have to pay ISE a sum of Rs one crore for participating on the exchange. Additionally, a trader of that exchange, say of the Baroda StockExchange, has to pay a sum of Rs 5,000 for registration with Sebi, Rs 5,000 towards the trade guarantee fund, an annual fee of Rs 1,000 and an insurance of Rs 8,500.

"Every trader will have to meet the regulatory obligations as well as be registered with Sebi for participating on ISE. Thus, first the exchange has to participate on ISE after which the member upon fulfilling the regulatory requirements can trade on ISE", said Massey.