Internet Trading Policy
Summary
This circular outlines the regulatory framework for internet-based trading on Indian stock exchanges, requiring brokers to obtain specific permissions. It mandates minimum conditions regarding net worth, operational integrity, and system capacity for brokers offering such services. The document details strict requirements for client protection, risk management, network security protocols, and interface standards.
Text
The SEBI Board has approved the report on Internet Trading brought out by the SEBI Committee on Internet Based Trading and Services.
SEBI Registered Brokers can introduce the service after obtaining permission from respective Stock Exchanges.
Exchanges while giving permission will be required to ensure minimum conditions specified in the report which is available on the SEBI’s web site.
The stock exchange should grant approval or reject the application as the case may be, and communicate its decision to the member within 30 calendar days of the date of completed application submitted to the exchange.
The broker must have a minimum net worth of Rs.50 lacs if the broker is providing the Internet based facility on his own.
The Stock Exchange must ensure that the system used by the broker has provision for security, reliability and confidentiality of data through use of encryption technology.
The Stock Exchange must also ensure that the brokers maintain adequate backup systems and data storage capacity... and arranged for alternative means of communications in case of Internet link failure.
The Stock Exchange must lay down the minimum qualification for personnel to ensure that the broker has suitably qualified and adequate personnel to handle communication including trading instructions...
Stock Exchange must develop uniform written procedures to handle contingency situations and for review of incoming and outgoing electronic correspondence.
For this purpose it should be mandatory for participants to use certification agencies as and when notified by Government / SEBI.
The Stock Exchange must ensure that brokers comply with all requirements of 'Know Your Client' and have sufficient, verifiable information about clients...
Brokers must enter into an agreement with clients spelling out all obligations and rights... The broker agreement with clients should not have any clause that is less stringent/contrary to the conditions stipulated in the model agreement.
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Source: SecMarx — Internet Trading Policy. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.