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Securities and Exchange Board of India

General Manager

Secondary Market Department

e-mail :

SEBI/SMD/SE/Cir- 26/2003/25/06

June 25, 2003


The Managing Directors and Executive Directors

Of All Stock Exchanges

Dear Sir,

Sub :- Close out mark up in respect of debentures and bonds traded on the Stock Exchanges

The SEBI circular No.SMD/Policy/IECG/5548/96 dated December 09, 1996, stipulates in para no. 1 that the mark up for the close out shall be 20% above the official closing price. This mark up was applicable to close out of equities as well as debentures and bonds.

SEBI has received representations from the exchanges that the debentures and bond issued by the companies and traded at the exchanges do not experience daily price variation in fashion similar to the equities and that the presently applicable 20% close out mark up is almost equal to the interest due on bonds and debentures in most cases and thus is unduly high. The matter was discussed in the Advisory Committee on Derivatives and Market Risk Management.

Pursuant to the discussions of the Advisory Committee on Derivatives and Market Risk Management, it has been decided that close out mark up of 5% would be applied in case of debentures and bonds which are assigned a credit rating of triple A and above. However, for the other debentures and the bonds without the triple A credit rating, the existing close out mark up of 20% shall be applicable as is applicable in the case of equities.

The undersigned has been authorised to direct Exchanges 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.

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,

P K Bindlish


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