However, since this guarantee is contractual, it would be extended only to trades that are matched on the screen. The guarantee, therefore, would become effective after the NSE kickstarts screen-based trading in this segment, which is due in early-May. More than 50 active NSE members have already signed up so as to be able to offer this facility to theirclients in the semi-retail segment.

All WDM members who wish to avail of this scheme would contribute Rs 20 lakh in the form of a base contribution. Further, the exchange would release a sum of Rs 20 lakh from each of the existing non-adjustable, interest-free deposits of Rs 25 lakh each member has kept with the exchange, also by way of the base contribution.

The setting up of the fund and the screen-based trading are some of the measures taken up by the NSE-NSCCL combine to help eliminate the disadvantages faced by the semi-retail players in an environment where these players have to trade bi-laterally between themselves in negotiated trades, without the backing of guarantees or the DVP system. The high risk of counterparty default under such circumstances makes institutional players reluctant to transact with them.

Another reformatory measure that has been initiated by NSCCL is to set up a common clearing and settlement framework for its constituent SGL (SGL11) holders. This will help the market tomove towards uniform settlement procedures and into a delivery versus payment system even in the case of these semi-retail players who do not have an SGL account directly with the Reserve Bank of India.

Global Trust Bank has been designated a clearing bank for the debt segment, while talks are on with Canara Bank and HDFC Bank for a similar purpose. All the three banks, which operate as clearing banks for the equity segment, could become clearing agents, in which case their SGL 11 would be handled by NSCCL.

Last year, the Reserve Bank of India permitted NSCCL to open a subsidiary general ledger (SGL) facility (such as the one gven to banks and financial institutions to enable them to hold their securities in electronic form). This, in turn, has enabled NSCCL to offer a constituent SGL and current account facility to a cross section of non-institutional players like PFs and corporates. For the past few years these entities have been allowed to either hold their securities with the RBI only in physicalform, or open SGL accounts with any authorised bank to avail of the delivery versus payment settlement facility.

However, neither of these facilities turned out to be a satisfactory option. Not only did this restrict trades and hold up their treasury management, it also led to a polarisation of the market into the physical and non-physical, enhancing its shallowness. All these issues are expected to be adequately addressed once this series of measures is implemented.

Norms set down by the NSE for availing of the guarantee fund state that the maximum gross exposure will be 20 times of the base contribution of each clearing member to the fund. They could increase exposure by bringing in additional base contribution in the form of cash, bank guarantees, or fixed deposit receipts of approved banks.

To contain risk arising from market volatility, NSCCL could levy suitable security specific margins (SSMs), which would be collected whenever the variation in the weighted average price of a security exceeded acertain level as compared to that on the previous day. Members would have to deposit these margins stipulated from time to time with clearing banks before the end of the next working day. Any non-payment or non-delivery for trade settlement would lead to a penalty at 30 per cent per annum on the consideration of the trade for four days. Furthermore, clearing members who fail to deliver the required securities or the funds will be debited the difference between trade price and valuation price. Finally, all delayed payment of margins or other sums due from clearing members shall have a penalty imposition at 36 per cent per annum till realisation.