This Executive Summary highlights the principal recommendations of the Group (majority view). As explained in his note of dissent, Dr. R. H. Patil does not concur with some of these recommendations. The group recommends several significant changes in the Revised Carry Forward System (RCFS). The system emerging from these modifications is referred to below as the Modified Carry Forward System (MCFS). The Group recommends abolition of the twin track system of segregating carry forward trades and delivery trades.

A uniform margin of 10% on gross positions with daily marking to market should be applied to both types of transactions. Margin payments to the exchange must be value dated the same day. Over a period of time, exchanges must move towards realization of margin payments before the next day's trading begins. As a precondition for adopting the MCFS, an exchange should have a well designed software for margin computation and well established governance structures and administrative infrastructure for monitoring and enforcing the margining system.

The Group recommends elimination of the following elements of the RCFS:

1. Limit of 90 days for carried forward of transactions
2. Settlement only by delivery after 75th day
3. Limit of Rs 10 crore on financier funding
4. Overall limits, sub limits on purchase and sale, and scripwise limits on carry forward transactions and on overall transactions.

In the case of vyaj badla in respect of dematerialized shares, a pledge of the shares should be marked in the electronic records of the depository. In the paper based system, the Group recommends that shares received by vyaj badla financiers should continue to be deposited with the clearing house as at present. In addition to other risk containment measures, the clearing house should at all points of time have an insurance policy covering the aggregate value of shares lying in the clearing house.

The Group endorses and emphasises some of the existing safeguards:

1. Capital adequacy and other prudential safeguards must be strictly enforced
2. While choosing scrips for carry forward, the exchanges must ensure that the scrips have sufficient floating stock and high liquidity.
3. Exchanges should have adequate monitoring and surveillance systems to enable timely use of the various powers vested in them to regulate the market.