The IPSTA management will meet the market regulator to apprise of the progress made by the bourse in setting up the TGF by the end of this month.

The pepper bourse will soon call an urgent meeting of all its members to consider the necessary amendments to be made to get the seed capital for TGF, senior officials of IPSTA said.

The commodity market regulator in its reply to the draft proposal submitted by IPSTA on TGF has found the Rs 32-lakh initial corpus fund proposed by the pepper bourse to set up a fund guaranteeing domestic contracts inadequate and asked the association to hike it to a minimum level of Rs 50 lakh.

Following theFMC directive, the guarantee committee of the exchange had met here the other day and decided to accept the FMC fiat thus warding off another bout of showdown between the exchange and regulator.

The draft proposal had suggested that the bourse would set up a TGF under a separate trust with five trustees to administer the fund. IPSTA has weighed four alternative scenarios for assessing the risk element and setting up the TGF, including methods-based on physical deliveries, margin deposits and prices.

Considering these models the bourse management had zeroed in on to the method based on highest/lowest prices for setting up the TGF. According to this method, the initial corpus fund needed to set up the TGF is estimated to be at Rs 32 lakh.

The exchange had proposed to hike the initial corpus from its internal accruals and from the members contributions. According to the proposal, while 50 per cent of the fund would be raised from the members as contribution, the remainder would come from IPSTA as aninvestment.

However, IPSTA would meet and seek the regulator's nod for the three-year time-frame set in the draft proposal to raise the TGF from the initial level to Rs one crore. This, according to IPSTA sources, is because the accretion to the initial corpus is linked to the growth in the volume traded on the exchange. The draft report had proposed to raise the corpus fund from its initial level to Rs one crore eventually, subject to yearly reviews. This will be done by slapping a recurring contribution to the tune of Rs 12.50 per unit each from buyers and sellers.

Of this, 10 per cent will go to FMC, 20 per cent to IPSTA as service charges and the balance to TGF, the proposal said. Based on an average of the last three years' transactions, FMC will get Rs 1.35 lakh per annum and TGF Rs 10 lakh, the report added. Top brass of the IPSTA will meet the FMC on August 30 to apprise of the developments and seek the regulator's nod for opening contracts beyond October. The IPSTA management will call a meetingof its members to get their necessary concurrence for the new system soon, sourcessaid.