SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, A Wing, Gr. Floor,
224, Nariman Point, Mumbai 400 021
SMD-II/POLICY/CIR-37/99
November 26, 1999
To,
The Executive Directors/Managing Directors
of all the Stock Exchanges
Dear Sir/Madam,
Subject: Floating of a Subsidiary/Company by a Stock Exchange to acquire the membership of other Stock Exchange.
A meeting of a Group on Revival of Small Stock Exchanges was held on September 8, 1999, to discuss the suggestions/revival plans forwarded by the small exchanges for their revival. The Group considered the suggestions/revival plans submitted by the small stock exchanges and recommended that small stock exchanges may be permitted to promote a subsidiary which can acquire membership rights of larger stock exchanges viz. NSE/BSE/CSE/DSE or any other exchange subject to usual conditions applicable to the other members.
In this connection, it has been decided that small stock exchanges may promote/float a subsidiary/company to acquire membership rights of other stock exchange subject to the under noted conditions :
1. The subsidiary/company shall be 100% owned by the stock exchange promoting/floating such a subsidiary/company. The name of the subsidiary/company shall not contain the words “Stock Exchange”.
2. The members of the Stock Exchange shall register themselves as sub-brokers of the subsidiary/company to enable them trade through the subsidiary/company.
3. The subsidiary/company shall not undertake any dealing in securities on its own account.
4.The subsidiary/company shall register only the members of the stock exchange, which is promoting the subsidiary/company as its sub-broker and no other client/sub-broker shall be entertained by the subsidiary/company.
5. The sub-brokers of the subsidiary/company shall maintain separate deposit with the subsidiary/company. The Base Minimum Capital deposited by the sub-broker with the promoting stock exchange shall not be transferred to the subsidiary/company. This deposit to be maintained with the subsidiary/company shall be in the form of cash only.
6. The trading/exposure limit of the sub-brokers shall be based on the deposit received by the subsidiary/company from the sub-brokers and these limits shall not exceed the limits as prescribed by the stock exchange of which the subsidiary/company is a member.
7. The subsidiary/company shall collect margins from the sub-brokers for the payment of margins to the respective stock exchanges of which the subsidiary/company is a member. The margin imposed by the subsidiary/company on its sub-brokers shall not be less than the margin payable to the stock exchanges of which the subsidiary/company is the member.
8. The stock exchange shall incorporate the above mentioned conditions in the Memorandum of Association/Articles of Association of the subsidiary/company.
Yours faithfully,
P. K. BINDLISH
DIVISION CHIEF
SECONDARY MARKET DEPARTMENT
