IPSTA management is hopeful that the fund will become operational by October first week following which it could open new contracts. The pepper trade in the country has come to a virtual halt since early this month as the Forward Markets Commission (FMC), after giving several extrenctions, barred the country's only pepper trading exchange from opening new contracts beyond October.

Ipsta, at present, is only running October futures even as the bye-law of the exchange permits running six contracts at a time.

Speaking to The Financial Express, IPSTA president Sanjay Mariwala said that the association members on Wednesday had cleared thedirector board's decision to set up a separate in-house TGF for domestic futures run by the exchange as directed by FMC. The Rs 50 lakh fund will be partly financed by Ipsta from its internal resources.

"The association will shell out Rs 35 lakh towards setting up the fund while another Rs 15 lakh will be raised from members as non-refundable contributions," Sanjay said. He said, each members will contribute Rs 10,000 each for setting up the guarantee fund. Ipsta has a total membership strength of 165. He said, the management is hopeful of kicking off the fund by early next month. According to the EGM's decision, which was earlier cleared by the market regulator, the TGF will be registered as a section 25 company run by a separate trust under the name `IPSTA Domestic Division Trade Guarantee Fund', with five trustees to administer the fund.

Ipsta had weighed four alternative options for assessing the risk element and setting up the TGF. These include methods-based on physical deliveries, margin depositsand prices. Considering these models the bourse management has zeroed in on to the method based on highest/lowest prices for setting up the TGF.