MUMBAI, October 24: The L C Gupta committee on derivatives has tentatively agreed upon stringent networth conditions and margins applicable to members participating in derivatives trading.For members intending to take it up, the proposed networth is Rs 3 crore per member. Out of this Rs 50 lakh will have to be put up as upfront margin. ``Such members will have to undertake a certificate test indicating professional qualification. He will also have to compulsorily obtain from his clients the margin money for contracts, in advance,'' according to Gupta, chairman of the panel.There will be regular inspection to ensure that this is met. The maximum trading that a member can do is proposed to be restricted to 10 times the upfront margin. Mark-to-market margins are also proposed to be sought. Special emphasis is also being laid by the committee on broker-client relationship. ``Members will also have to give clients a formal risk disclosure document and ensure that they know their clients on a personal basis. They will have to maintain a separate account of the client money,'' Gupta said.The panel is likely to allow any existing exchange to start derivatives trading, provided certain strict conditions are met. Earlier the committee had been deliberating on whether a separate exchange needed to be set up for the purpose of derivatives trading.According to Gupta, the proposed conditions for exchanges include:* The exchange should have a high level of technological capability, in terms of its trading system, ability to take up huge surges in volumes and disaster recovery systems.* There should be a good surveillance capacity on a real-time basis.* Clearing of derivatives trading should be done by a separate clearing house that can guarantee trades.* The exchange should have a good record of surveillance and monitoring skills.* The exchange should have a separate derivatives division and a separate derivatives board that operates independently of the regular board.The central theme running through the introduction of derivatives trading is that the regulation will be the responsibility of the exchanges and SEBI will step in only as the last resort. SEBI, it is proposed, will have a separate full time derivatives cell and advisory committee. SEBI should also have an economic research wing "because there is a lot of research involved in this". The committee will be meeting again on November 12. The report will be finalised after a couple of more meetings.
