The President/Executive Directors
of all recognised Stock Exchanges
Review of the working of Stock Exchanges
Please refer to the circular F.No.4/16/SE/19 dated August 19, 1991 on the above subject issued by the Stock Exchange Division, Ministry of Finance directing the Stock Exchanges to implement certain measures in the interest of long term growth of the Stock market and for ensuring investor protection. The measures suggested by the Government were: (i) the member-brokers should indicate to the clients execution price of transactions and the brokerage separately in the contract notes, (ii) The Exchanges should levy a minimum daily margin of 25% on gross outstanding positions of their members in respect of all shares in the specified list, (iii) ensure that all settlements take place strictly on schedule and (iv) the Governing bodies should be broad-based in a manner that the ratio of elected directors and outsiders is 50:50. You were also requested to submit the periodical reports on implementation of each of the above measures to the Ministry of Finance and SEBI. In order to enable us to furnish a consolidated report to the Government on progress made by the Stock Exchanges in implementation of the above measures, we shall appreciate it if you will please arrange to send to us a report indicating the steps taken by your Stock Exchange so far to implement the above measures. It may also be mentioned that the Government and Securities and Exchange Board of India are likely to take a serious view of the slow implementation of these directives of Government.
Besides, we have been receiving complaints from investors that the members of most of the Stock Exchanges-still continue to follow the old practice of showing execution price net of brokerage in case of sale and gross of brokerage in case of purchase transactions not withstanding the direction issued by the Government to show the execution price of transaction and the brokerage separately as far back as in August 1991. In this connection, we suggest that the Stock exchanges should carry out sample scrutiny of contracts issued by their member-brokers and incorporate the findings thereof in the progress report to be submitted to Securities and Exchange Board of India.
Please ensure that your report in this regard reaches us by June 30, 1992 positively.
Kindly acknowledge receipt of this letter.