SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021
SMDRPD/Policy/Cir-6/2001
February 1, 2001
To:
The President/Executive Director/Managing Director of all the stock exchanges
Sir/ Madam
Meeting of all the Stock Exchanges- January 17, 2001
SEBI had convened a meeting of all the stock exchanges on January 17, 2001. Pursuant to the discussions in the meeting, the following decisions have been taken :
1. Client Code
Vide circular no. SMDRP/POLIC/CIR-33/2000 dated July 27, 2000 all the stock exchanges were directed to modify their software in such a way that client code becomes mandatory at the broker level. The modification was required to be carried out within three months from the date of the circular. It was further directed by our circular No. SMDRP/POLICY/CIR-55/00 dated December 6, 2000 that the stock exchanges which do not implement this directive by January 1, 2001, would not be permitted to conduct Modified carry forward system (MCFS) or Automated Lending and Borrowing Mechanism (ALBM) sessions.
Pursuant to the meeting of the stock exchanges referred above, it has now been decided :
a. that stock exchanges which have MCFS or ALBM facilities shall discontinue these facilities from February 28, 2001, if they fail to comply with this directive by that date.
b. other stock exchanges which do not offer these facilities, but have active trading, shall have to closedown trading from March 31, 2001, in case, they fail to comply with this directive by that date.
c. The stock exchanges which currently do not have any trading, shall implement the requirement of client code before trading commences at the exchange.
2. MCFS and ALBM margins
The margins on MCFS and ALBM are required to be collected on gross basis. At present, this is being done on the basis of self-certification by the broker. It has been decided that w.e.f. February 28, 2001 the stock exchanges offering these facilities shall calculate these margins from the system instead of on self-certification basis. Any exchange failing to comply shall discontinue undertaking MCFS and ALBM facilities.
3. Voluntary Rolling settlement and CFRS, ALBRS and CNS
Presently, the facilities of the CFRS, ALBRS and the CNS are available to specific scrips only in the compulsory rolling settlement. It has now been decided to extend the facilities of CFRS, ALBRS and the CNS to the voluntary rolling settlement segment of the exchanges, for all scrips which are eligible for these products in the account period settlement.
4. Use of Secondary Market for Primary Issues
(a) SEBI had notified guidelines for use of secondary market route for initial public offers in “Guidelines for offering securities in public issues through the Stock Exchange mechanism. DIP (Compendium) Series Circular No. 5 dated November 30, 2000”. The copy of the guidelines are enclosed herewith. These guidelines will also be available for the issue of debentures.
(b) In partial amendment to the clause 1 1A.7. 19 of the Guidelines it has been decided that the stock exchanges shall have the option to use the Trade Guarantee Fund / Settlement Guarantee Funds(TGF/SGF), subject to the following conditions :
i. If a stock exchange decides to use the TGF and SGF in this context, then this facility will have to be provided for all issues on the exchange;
ii. At any point of time, the aggregate exposure for the above purpose should not exceed 25% of the existing TGF/SGF; and
iii. The stock exchanges should collect a minimum margin of 25% of the issue price in cash. The exchanges may impose and collect higher levels of margin as they deem fit.
5. Margin on all trades
Vide circular no SMDRP/POLICY/CIR-33/2000 dated July 27, 2000, it was directed that all the clients, excluding FIs, FIIs, MFs shall maintain a deposit with the broker in the form of cash, bank guarantees, FDRs or approved securities which shall not be less than 10% of the net open positions of the client at any point of time. To ensure compliance with this requirement, the stock exchanges shall obtain an auditors’ certificate to this effect from all brokers on a quarterly basis. The brokers in turn, shall obtain a similar certificate from their sub-brokers.
6. Exit Route for members of Stock Exchanges
The stock exchanges proposing to buy-back the membership rights of their inactive members would be allowed to do so, within the existing legal framework. In case these exchanges have formed subsidiaries which have acquired membership of other stock exchanges to trade on those exchanges, they would also consult those stock exchanges.
7.Disclosure in trading system of buy- back offer by companies
The stock exchanges would provide for a separate icon in the order window which would disseminate the buy-back position as of the previous trading day.
The stock exchanges are advised to take immediate steps for the implementation of the above decisions. Thanking you,
Yours faithfully
P K BINDLISH
Deputy General Manager
Secondary Market Depository,
Research & Publications Department
e-mail : [email protected]
