Master Circular on Allotment of codes to Stock Exchanges, Subsidiary management by Stock Exchanges, Governance of recognised Stock Exchanges and Arbitration in recognised Stock Exchanges
Summary
This part of the document establishes a Master Circular consolidating SEBI directions on stock exchange codes, subsidiary management, governance, and arbitration up to March 31, 2010. It details the two-digit code system for stock exchanges and lists specific entities with their assigned codes. The text further outlines conditions for small stock exchanges promoting subsidiaries and eligibility criteria for trading in derivatives segments. This section outlines the nomination, tenure, and eligibility criteria for Public Representatives and other directors in subsidiary companies. It details the appointment process for the Chief Executive Officer and the staffing requirements to ensure independence from the parent exchange. Furthermore, it defines the risk management responsibilities of the parent exchange and establishes the composition and governance rules for the Governing Board of recognized stock exchanges. This section outlines eligibility criteria and disqualifications for Governing Board members, including corporate directors and those with disciplinary histories. It establishes the appointment, selection committee composition, and operational powers of the Chief Executive.
Text
The Securities and Exchange Board of India has, from time to time, issued various circulars/directions on the captioned subject. In order to enable the users to have an access to all the applicable circulars at one place, this Master Circular has been prepared.
This Master Circular consolidates the circulars/directions issued by SEBI in this regard up to March 31, 2010 as listed in the Schedule and shall come into force from the date of its issue.
Each of the stock exchanges in the country has been given a two-digit code which is incorporated in the twelve digit registration number given to the trading members. The code number for the exchange is the first two digits after the letters "INB" in the registration number.
The stock exchange and its trading members shall together hold 100% in nominal value of the equity share capital of the subsidiary company, with the exchange holding not less than 51% in nominal value of the equity share capital of the subsidiary company.
The name of the subsidiary company shall not contain the words "Stock Exchange".
The subsidiary company shall not undertake any dealing in securities on its own account.
The subsidiary company shall register only the trading members of the stock exchange, which is promoting the subsidiary company as its sub-broker and no other client / sub-broker shall be entertained by the subsidiary company.
The Base Minimum Capital deposited by the sub-broker with the promoting stock exchange shall not be transferred to the subsidiary company. This deposit to be maintained with the subsidiary company could be 25% in the form of cash and the balance 75% in irrevocable bank guarantees or Fixed Deposit Receipts (FDRs).
The subsidiary company shall collect margins from the sub-brokers for the payment of margins to the respective stock exchanges of which the subsidiary company is a trading member. The margin imposed by the subsidiary company on its sub-brokers shall not be less than the margin payable to the stock exchanges of which the subsidiary company is the trading member.
For becoming a trading and or clearing members of the derivatives segment, the eligibility criteria laid down by the stock exchanges and prescribed under the SEBI (Stock Broker and Sub-Broker) Regulations, 1992 have to be fulfilled including the conditions as follows: a) All the risk containment measures laid down by SEBI shall be followed by these subsidiary companies and b) These subsidiaries shall not undertake proprietary trade.
The Chief Executive Officer (CEO) of the subsidiary company shall be a director on the Board of Subsidiary. The CEO shall not be a sub-broker of the subsidiary company or a trading member of the parent exchange.
At least 50% of Directors representing on the Governing Board of subsidiary company shall not be sub-brokers of the subsidiary company or trading members of the promoter / holding exchange (parent exchange). These directors (excluding CEO) shall be called the Public Representatives.
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Source: SecMarx — Master Circular on Allotment of codes to Stock Exchanges, Subsidiary management by Stock Exchanges, Governance of recognised Stock Exchanges and Arbitration in recognised Stock Exchanges. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.