SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, A Wing, Gr. Floor,
224, Nariman Point, Mumbai 400 021
SMDRP/Policy/Circular-20/98
September 18, 1998
To the Executive Directors, and
the Managing Directors of all the
Stock Exchanges,
Sir,
Negotiated Deals
A Committee was constituted by SEBI to study the existing procedures relating to Negotiated Deals taking place in the market and to make recommendations for the purpose of imparting greater transparency and fairness on such deals. The Committee has had several meetings and deliberated on the various issues related to negotiated deals. The meeting of the Committee on Negotiated Deals was held on July 17, 1998, and listed below are the guidelines for the negotiated deals as decided in the meeting.
Definition of negotiated deal:- Any transaction which has either a transaction value of not less than Rs 25 lakhs or volume of not less than 10,000 shares and which has been executed at a price not formed through the stock exchange price and order matching mechanism would be termed as a negotiated deal.
Reporting:- All negotiated transactions should be reported to the stock exchanges within 15 minutes of trade being negotiated. Any transactions after the trading hours of the Exchange would be reported immediately on the next trading day at the start of the market hours. The stock exchanges should prescribe the penalties for the violations of the reporting requirements.
Dissemination of information:- All negotiated deals reported to the exchanges and displayed on the screen must include name of the security, price, quantity, value and the name of the brokers involved. The Exchanges must make arrangements for dissemination of this information relating to the execution as well as the cancellation of the negotiated deals on their screens immediately. However, for the purpose of market statistics, the negotiated deals will be shown separately.
Settlement:- As already decided by SEBI and communicated to the stock exchanges, all negotiated deals must result in delivery. Cancellation of deals can take place only in special cases with the prior approval of the stock exchanges. The transactions may be settled either through the clearing house of the stock exchange/ clearing corporations or bilaterally as prescribed by the concerned exchange. If the transaction is settled bilaterally, then the exchange shall devise a mechanism for obtaining and monitoring the actual settlement details. However, the negotiated deals will not be covered by the Settlement Trade Guarantee Funds of the stock exchanges/clearing corporations. Any dispute arising out of the deals would be resolved through the arbitration mechanism of the Exchange.
Cross deals:- Cross deals executed between two clients of the same broker above the size applicable for negotiated deals will be subject to the above set of disclosure, reporting and settlement requirement.
Thanking you
Yours faithfully
P K BINDLISH
Division Chief
Secondary Market, Depository
Research & Publications Department
E-mail : smd @ sebiho.ernet.in
Internet : www.sebi.com
