sebi:WTM/KMA/DNPD/253/04/2010
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Facts / Headnote
Show cause notice dated October 30, 2009 disposed of without directions or action; advisory instruction issued to BSE for future
Provisions invoked
- s. 11(4)
- s. 19
- s. 12A
Parties
- Bombay Stock Exchange Limited
Holding
The show cause notice dated October 30, 2009 issued to Bombay Stock Exchange Limited was disposed of without issuing directions or taking action under Section 11(4) of the SEBI Act and Section 12A of the SCRA, while advising BSE to bring future schemes with wide implications to SEBI's attention.
Full text
Page 2 of 7 scheme also proposed to reimburse the losses sustained by such market makers indulging in market making in the derivatives segment. Thereafter, SEBI vide letter dated September 29, 2004 advised BSE that such a scheme would expose it to the risks of market making and therefore, had not allowed BSE from taking “commercial risks as insurance agency”. It was further informed that if, BSE intended to promote market making in the derivatives segment, it may submit a proposal which may include an incentive structure for market makers in accordance with international practices.
Page 3 of 7 Kannan, Chief Executive Officer & Managing Director, BSE, Mr. L.P. Aggarwal, Chief Financial Officer along with other officials of BSE were also present in the hearing.
Page 4 of 7 the impugned scheme which did not in any manner provide for the reimbursement of losses suffered by the market makers. During the hearing, the learned senior counsel submitted that the expenses incurred in relation to the impugned scheme were towards advertising and marketing expenses and that no part of the expenses or the incentives paid to such market makers were intended to reimburse any losses sustained by them. In this regard, he also referred to certain clauses of the agreement entered into with Apollo Sindhoori Capital Investments Limited (one of the market makers of the impugned scheme) which provided for the ‘targeted turnover’ and the ‘fees’ to be paid to such market maker. He further submitted that the impugned scheme was discontinued with effect from June 1, 2008 as BSE had failed to achieve the desired effects. The learned senior counsel further contended that SEBI Circulars dated January 20, 2002 & August 5, 1992 and the Press Release dated November 10, 2009 on ‘market making’ applied to the equity segment and the ‘SME’ segment, and that there are no specific rules/regulations/circulars issued by SEBI which prohibit or otherwise seek to regulate the manner in which a stock exchange would implement market making in the derivatives segment. One of the arguments put forward by the learned senior counsel is that there was no legal compulsion on the part of BSE to seek approval (prior or post facto) from SEBI and that it had sought prior approval from SE
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Source: SecMarx — sebi:WTM/KMA/DNPD/253/04/2010. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.