Use of Impact Cost Calculations of another Exchange

Jun 03, 2003

General Manager
Secondary Market Department
e-mail :

                                                            June 02, 2003

The Managing Directors and Executive Directors
Of all the Stock Exchanges

Dear Sir/Madam,

Sub :-    Use of Impact Cost Calculations of another Exchange

1. SEBI vide circular No. SMD/Policy/Cir-9/2003 dated March 11, 2003 stipulated that the scrips would be margined based on the categories in which it is included. The classification of scrips into Group I and Group II and III has been specified at para no.1-5 of the circular.  The methodology for the calculation of the mean impact cost has been provided in para no. 6 - i-iv of the aforementioned circular.

2. In this regard, SEBI had received representations from some stock exchanges expressing their inability to compute the mean impact cost calculations at their exchanges and sought the permission to use the impact cost calculations of NSE/ BSE.

3. It has been decided to allow such stock exchanges to use the impact cost of BSE or NSE provided that those stock exchanges have entered into a formal legal arrangement with the relevant stock exchanges (BSE or NSE) for liquidating the positions of their members if necessary, on that stock exchange.(BSE or NSE).

4. In case an exchange is unable to compute the mean impact cost of the scrips traded at the stock exchange, as well as have not been able to enter into a formal arrangement for liquidation of positions as stated in Clause 3 above, it shall levy margins on the scrips as applicable to Group II or Group III as provided in SEBI circular No. SMD/Policy/Cir-9/2003 dated March 11, 2003, as classification between scrips in Group I or Group II would not be possible at these Exchange.

5. The undersigned has been authorized to direct you to

a). make necessary amendments to the bye-laws, rules and regulations for the implementation of the above decision immediately.

b). bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website for easy access to the investors.

c). communicate to SEBI, the status of the implementation of the provisions of this circular in Section II, item no. 13 of the Monthly Development Report for the month of June 2003.

6. This circular is being issued in exercise of powers conferred by section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with section 10 of the Securities Contracts(Regulation) Act 1956, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,