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DNPD/ Cir-9/04

February 3, 2004

The Executive Director / Managing Director / Administrators

Of all Stock Exchanges.

Dear Sir,

Sub: Issuance of Electronic Contract Notes

This is in continuation of the SEBI circular no. SMDRP/POLICY/Cir-15/00 dated December 15, 2000 and clarification issued vide letter dated SEBI/SMD/SE/15/2003/29/04 dated April 29, 2003 on the issue of an electronic contract note whereby SEBI had permitted the issue of electronic contract notes with digital signature obtained from a valid Certifying Authority provided under the Information Technology Act, 2000 (IT Act). The exchanges were directed to make the necessary amendments to the bye-laws, rules and regulations for the implementation of the same.

It has been brought to the notice of SEBI that the format of the electronic contract note prescribed by the exchanges were not in conformity with the format of the physical contract note particularly with respect to the pre-printed terms and conditions. Hence members issuing electronic contract notes were also issuing physical contract notes which amounted to duplication and unnecessary reconciliation between the physical and electronic contract notes.

In order to streamline the issuance of electronic contract notes as a legal document like the physical contract note, the exchanges are advised to implement the following:

The exchanges would prescribe a standard format for the electronic contract note (based on the model format prescribed in Annexure A) in its bye-laws, rules and regulations.

The exchange bye-laws, rules and regulations for issuance of electronic contract note shall be amended to include all the standard pre-printed terms and conditions in the physical contract note. The electronic contract note would mention the relevant bye-laws / rules / regulations of the exchange subject to which the said contract note is being issued.

The exchange shall also modify / amend other relevant bye-laws, rules and regulations with respect to signing of the electronic contract note with a digital signature so as to make the modified format of the electronic contract note a valid legal document like the physical contract note.

The mechanism of record keeping of electronic contract notes in a soft non-tamperable form shall be prescribed by the exchange in compliance with the provisions of the IT Act, 2000.

Hence you are advised to, –

Make necessary amendments to the relevant bye-laws, rules and regulations of the exchange for the implementation of the above decision immediately.Bring the provisions of this circular to the notice of members of the Exchange and also disseminate the same on your website, if any. 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 February 2004.

This circular is being issued in exercise of powers conferred under 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 sincerely,


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