Download No. NSE/CMPT/4991

 

Ref.No: NSCCL/2004/0342                                                                            April 16, 2004

 

NATIONAL STOCK EXCHANGE OF INDIA LIMITED

 

Circular No. NSE/CMP/ 379                                                                           April 16, 2004

­­­­­­­­­­­­­­­­­­_____________________________________________________________________­­­­­_______

 

                                                                                                                     

All trading members are advised to take note of the provisions of the Circular No. NSCCL/ CM/C&S/293 dated April 16, 2004 issued by National Securities Clearing Corporation Ltd. The said circular is enclosed for your compliance.

 

 

 

For National Stock Exchange of India Limited

 

 

Suprabhat Lala

Manager

Capital Markets Department


 

NATIONAL SECURITIES CLEARING CORPORATION LIMITED

 

CAPITAL MARKET CLEARING & SETTLEMENT

 

CIRCULAR

 

To All Members,

Download ref no : NSE/CMP/379

 

Dear Member,

 

Re: Consolidated Circular no. NSCC/CM/C&S/293  dated April 16, 2004

 

Members are requested to note that a consolidated circular (NSCC/CM/C&S/293 dated April 16, 2004) in replacement of Circular no. NSCC/CM/C&S/175 and subsequent circulars upto NSCC/CM/C&S/292 issued as on date is enclosed herewith.

 

Some of the important changes and inclusions relate to the following:

 

  • Pay-in and pay-out of securities, including changed timings in the T+2 (working days) rolling settlement environment, settlement of physical deliveries at Clearing House at Mumbai.

 

  • New facilities such as automatic delivery out instructions (AUTO DO), direct pay-out to investors and inter-depository transfers.

 

  • Procedures pertaining to settlement of deals in trade-for-trade surveillance (TFTS) market.

 

  • Consolidated details on structure of penalties.

 

  • Close out procedures including those in case the securities that are not under “no-delivery”, TFTS and IL market deals.

  

The provisions of this consolidated circular no. NSCC/CM/C&S/293 shall be effective from April 17, 2004

 

 

Yours faithfully,

For National Securities Clearing Corporation Limited

 

 

 

Manager


Clearing Members are hereby notified the following

 

Table of Contents

 

S.No.

Description

Item 1

CLEARED AND NON  CLEARED DEALS

       Item  2

SETTLEMENT OBLIGATIONS

Item 3

PROCEDURE FOR SETTLEMENT OF NON CLEARED DEALS

Item 4

CLEARING DAYS AND SCHEDULED TIME

       Item 4A

PROCEEDURE FOR PAY=-IN/PAY-OUT OF SECURITIES

       Item 5

GUIDELINES FOR GOOD / BAD DELIVERY

       Item 5A

FORMAT OF MEMBERS STAMP

       Item 5B

ADDITIONAL GUIDELINES FOR GOOD / BAD DELIVERY

       Item 6

DELIVERY UNITS

       Item 7

VALUATION PRICE

       Item 8

CHARGES AND PENALITES

       Item 9

CLOSING OUT

       Item 9A

DEEMED CLOSING OUT  PRICES

       Item 10

BAD DELIVERY CELL

       Item 10A

COMPANY OBJECTIONS PROCEDURES

       Item 11

DOCUMENT AND REGISTRATION

       Item 12

FAKE/ FORGED/STOLEN CERTIFICATES

       Item 13

CERTIFICATION OF GOOD/BAD DELIVERY

       Item 14

REQUEST CASES & BAD DELIVERIES

       Item 15    

CLEARING HOUSE PROCEDURES

       Item 16

CLEARING BANK

       Item 16A

DEPOSITORY PARTICIPANT CLEARING ACCOUNT

       Item 16B

MUTUAL FUNDS SERVICE SYSTEM

       Item 17

MARGINS

       Item 18

SCHEME FOR DEPOSIT OF SECURITIES

       Item 19

PRIVITY OF CONTRACT

       Item 20

SETTLEMENT FUND

       Item 21

CLEARING AND OTHER FORMS.

       Item 22

ELECTRONIC REPORTING

                       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 1

 

In pursuance of Regulation 3.3 of the NSCCL Capital Market Regulations deals admitted on the CM clearing segment shall be distinguished as under:

 

1.1       Cleared Deals

 

Cleared Deals means the following deals executed on the Capital Market Segment of the NSE:

 

1. Deals executed in the Regular Market segment which also includes deals executed on Normal market,   Auction market, and also includes deals executed on Trade for Trade-Surveillance market (TFTS), etc (here in after referred to as Regular Market deals).

 

2. Deals executed on the Limited Physical Market (hereinafter referred to as LP Market deals).

  

3. Deals executed on the Inter Institutional Investors Market. (hereinafter referred to as IL Market deals).

 

1.2       Non Cleared Deals

 

Non Cleared Deals are deals other than cleared deals which are executed on the Capital Market Segment of the NSE and includes the following:

 

1. Deals executed in the Trade for Trade market (hereinafter referred to as TT Market  deals).

2. Any other deals not specified herein executed on NSE.

 

 

 

                                                                                                                                      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 2

 

In pursuance of Regulations 4.3 and 4.4 of the NSCCL Capital Market Regulations the basis for clearing and settlement of deals and settlement obligations is specified as under:

 

2.1              TT Market Deals

 

TT Market deals shall be settled on a trade for trade basis and settlement obligations shall arise out of every deal.

 

2.2              Regular Market Deals

 

2.2.1        Normal Market

 

Normal Market deals shall be cleared and settled on a net obligations basis. Trading and settlement periods shall be specified by the relevant authority from time to time. Regular Normal Market deals executed during each period and reported to the Clearing Corporation shall be settled on a net obligations basis  at the end of the relevant trading period. Subject to the fulfillment of the above, this shall give rise to settlement obligations of Normal Market deals for that settlement.

 

2.2.2        Auction market        

 

Auction Market deals shall be cleared and settled on a trade for trade basis. Trading and settlement periods shall be specified by the relevant authority from time to time. Auction Market deals executed during each period and reported to the Clearing Corporation shall be settled on a gross obligations basis at the end of the relevant trading period. Subject to the fulfillment of the above, this shall give rise to settlement obligations of Auction Market deals for that settlement.

 

2.2.3        Trade for Trade -Surveillance Market (TFTS) Deals

 

As a measure of risk containment, the relevant authority may shift from time to time certain securities from Normal Market to Trade for Trade Surveillance Market (TFTS). Trading and settlement periods shall be specified by the relevant authority from time to time. TFTS Market deals executed during each period and reported to the Clearing Corporation shall be cleared and settled on a trade for trade basis at the end of the relevant trading period. Subject to the fulfillment of the above, this shall give rise to Settlement Obligations of TFTS Market deals for that settlement.

 

2.3       LP Market Deals

 

LP Market Deals shall be settled on a trade for trade basis and settlement obligations shall arise out of every deal.

 

 

 

 

2.4       Inter-Institutional Market (IL) Deals

 

Inter-Institutional Deals executed on behalf of institutional investors shall be settled on a trade-for-trade basis and delivery obligation shall arise out of each trade. Settlement of all transactions shall compulsorily be done in demat mode only.

 

2.4.1    Trading in this market shall be available for 'institutional investors' only. In order to ensure that the overall FII limits are not violated, selling in this market is restricted to FII clients. Buying is restricted to FII and FI clients. Members are required to enter the custodian participant code at the time of order entry and to ensure that the selling / buying restrictions are strictly adhered to. Violation of these stipulations shall be viewed seriously and shall be severely dealt with disciplinary action, which may include penalties, penal action, suspension, withdrawal of trading facilities, etc.

 

2.4.2    A sale order entered by trading members on behalf of non FII clients or a buy order entered by trading members on behalf of non FII / non FI clients, shall be deemed to be invalid and any trade arising from such order shall be compulsorily closed out by the Clearing Corporation at 20% over the actual trade price, without any further reference to the parties to the trade. The member entering the invalid order shall further be liable for disciplinary action which may include penalties, penal action, withdrawal of trading facilities, suspension etc.

 

2.4.3    Members are not allowed the facility of trade warehousing for the II Market segment and accordingly members are not required to mark the orders for NCIT and warehousing. If any orders are marked for NCIT and/or warehousing the same shall be removed by the Clearing Corporation.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 3

 

In pursuance of Regulation 5.1 to 5.7 of the NSCCL Capital Market Regulations the procedure for settlement of non cleared deals is specified as under:

 

3.1       Procedure for Settlement of TT Market Deals in the Capital Market segment

 

3.1.1   Settlement Obligations for TT Market deals have to be settled within 2 working days (T + 2 basis) from the date of deal directly between the buying and selling clearing members.

 

3.1.2   The exchange of securities and funds have to take place between the buying and selling clearing members outside the clearing house.

 

3.1.3   The selling clearing member is required to render delivery of securities to the office of the buying clearing member in exchange for funds which may be paid by means of Cheque/Demand Draft/Pay-order by the buying clearing member. The means of payment must be such as to enable the selling clearing member to realise the funds on the same day as the exchange of securities.

 

3.1.4  Settlement details must be reported by Custodian and/or TM clearing members to the Clearing Corporation in the formats prescribed as Form No: NSEF 07A or 07B respectively within 24 hours of the settlement.

 

3.1.5  The delivery of securities in settlement of TT Market deals can be the following units

 

             3.1.5.1 in marketable lot,  or

             3.1.5.2 in certificates of denomination of 1000 shares, or

             3.1.5.3 in certificate of the denomination of the traded quantity.

 

3.1.6  The choice of deciding on the denomination of certificates will rest with the delivering clearing member.

 

3.1.6.1 TM Clearing members will receive a report of Settlement Obligations for TT Market deals at the end of the day.

 

3.1.6.2 Custodian Clearing Members will receive a report of Settlement Obligations for the TT Market deals executed on behalf of their clients at the end of the day.

 

3.1.6.3 Custodian Clearing Members are required to confirm TT Market deals executed on behalf of their clients for settlement purpose within the settlement periods  specified by the relevant authority from time to time. In case the custodian clearing member does not confirm the deal, the responsibility to settle the deal will shift to the TM Clearing Member who executed the deal.

 

 

 

 

3.2       Non-settlement of TT trades

 

3.2.1 In case a member expresses inability to settle the trade either by paying funds or delivering securities, then the trade will be deemed closed-out at the highest price prevailing in the NSE in  Regular Market  from the trading day till the date of settlement or 20 % above the official closing price in the Regular Market on the date of settlement  of such trade, whichever is higher. .

 

3.2.2    In case of non rectification/replacement of any bad delivery, the trade will be deemed closed-out at the highest price prevailing in the NSE in Regular Market from the trading day till the date of settlement or 20% above the official closing price in Regular Market on the date of settlement of such trade, whichever is higher.    

 

3.2.3    The defaulting member shall pay the difference between the settlement price and close out price within 5 working days from the date of settlement to the counterparty failing which the amount of difference shall be debited by Clearing Corporation to the account of the defaulting member. On recovery of the said amount, the credit thereof shall be given to the receiving member. 

 

3.2.4    If the defaulting party does not pay the difference, the aggrieved party can refer the matter to the clearing corporation for suitable actions.

 

3.2.5    The defaulting party shall further pay a penal charge of 0.5 % of the traded value to Clearing Corporation. The penal charges shall be debited to the clearing accounts of the members and will be transferred to the Settlement Guarantee Fund.

 

3.3       Cancellation of Trades

 

In case a deal executed in TT segment is cancelled by a Clearing Member, a penal charge of Rs.1000 for each cancellation of a trade shall be levied.  If a clearing member is buying as well as selling member, Rs.2000 shall be collected as charge for cancellation of Trade.  The cancellation charges shall be levied without prejudice to any disciplinary action and on continuance of such instances, the matter shall be referred to the Disciplinary Action Committee.

 

3.4        Failure to report settlement of TT trades

 

Where a member fails to report settlement of the TT trades within 24 hours of the settlement date, a processing fee of Rs. 500 /- per trade per day subject to maximum of 2.50 times the value of the trade for each side with a ceiling Rs. 5000/- shall be levied for late reporting of a trade  on such a member even though the trades are settled by the settlement date .

 

3.5       Failure to settle TT trades on the settlement date

 

3.5.1 Members shall seek prior approval of the Clearing Corporation to grant extension of the settlement date, if due to unavoidable circumstances they would be not able to settle the trades by the settlement date. The relevant authority may, if satisfied that such circumstances exist in its absolute discretion, approve any such extension of settlement date.

 

3.5.2 Where a member fails to obtain prior approval from Clearing Corporation for extension of the settlement date of the TT trades, a processing fee of Rs. 500 /- per trade per day subject to maximum of 2.50 times the value of the trade for each side with a ceiling Rs. 10000/- shall be levied for late settlement of a trade. 

 

3.5.3 Where  a member establishes to the satisfaction of the relevant authority that the failure to settle is on account of non-payment of funds or non-delivery of securities by the counter-party member and that he has fulfilled his part of obligation in full and in time, the relevant authority in such cases may not impose the penal charges on such a member.

 

 


Item 4

 

In pursuance of Regulation 6.2 of the NSCCL Capital Market Regulations it is hereby notified that the time schedule to be observed with regards to Clearing House, Depository Clearing System and Clearing Bank is specified as under:

 

4.1       Regular Market Deals

 

4.1.1                Settlement in Physical Deliveries through Clearing House

 

Delivering members shall deliver all documents to the Clearing House during its regular business hours from 9.30 am to 10.30 am on the settlement day. Receiving members will be allotted specific time slots on settlement day to collect the documents from the Clearing House at Mumbai..

 

4.1.2                   Settlement in Depository Clearing System

 

The delivering member shall complete delivery instructions for transfer of securities from CM  Clearing Pool Account not later than 10.30 a.m. on the settlement day in case of NSDL. Similarly, member shall transfer securities for pay-in  the CM Clearing pool account not later than 10.30 am in case of CDSL. The  depositories shall facilitate transfer of such securities to  ‘NSCCL Settlement Pool account’ on or after 11.00 a.m

 

The depositories shall credit the receiving members' receipt account within his CM Clearing Pool Account with the depository on or after 1:30 p.m. on the settlement day.

 

4.1.3                Clearing Bank

 

The paying member shall have clear funds in his account on or before  10.30 a.m on the settlement day. The Clearing Bank shall debit the paying members' account on or after 11.00 a.m

 

The Clearing Bank shall credit the receiving members' clearing account on or after  1.30 p.m on the settlement day.

 

4.3              LP Market Deals

 

4.3.1                                Settlement in Physical Deliveries through Clearing House.

 

Delivering members shall deliver all documents to the Clearing House during its regular business hours from 9.30 am to 10.30 am on the settlement day. Receiving members will be allotted specific time slots on settlement day to collect the documents from the Clearing House.

 

Members shall be required to pay-in securities and receive pay-out of securities at the Clearing House at Mumbai.

 

 

 

 

 

4.3.2                Clearing Bank

 

The paying member shall have clear funds in his account on or before 10.30 am. on the settlement day. The Clearing Bank shall debit the paying members' account on or after 10.30 am

 

The Clearing Bank shall credit the receiving members' clearing account on or after 1:30 pm. on the settlement day.

 

4.4.      Inter-Institutional (IL) Market Deals.

 

4.4.1                    Settlement in Depository Clearing System

 

The delivering member shall complete delivery instructions for transfer of securities from CM  Clearing Pool Account not later than 10.30 a.m. on the settlement day in case of NSDL. Similarly, member shall transfer securities for pay-in the CM Clearing pool account not later than 10.30 am in case of CDSL. The  depositories shall facilitate transfer of such securities to  ‘NSCCL Settlement Pool account’ on or after 11.00 a.m

 

The depositories shall credit the receiving members' receipt account within his CM Clearing Pool Account with the depository on or after 1:30 p.m. on the settlement day.

 

4.4.2               Clearing Bank

 

The paying member shall have clear funds in his account on or before 10.30 am. on the settlement day. The Clearing Bank shall debit the paying members' account on or after 10.30 am

 

The Clearing Bank shall credit the receiving members' clearing account on or after 1:30 pm. on the settlement day.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 4A

 

4A   Pay-in of securities

 

4A.1                Auto Delivery Out

 

A facility has been provided to members to execute  delivery-out instructions for moving securities from CM Clearing Pool Account to Delivery Account generated automatically by the Clearing Corporation based on the net delivery obligations of its Clearing Members.

 

Clearing members desirous of availing this facility will be required to send a letter in the format provided at Annexure – 4.1

 

The features of this facility are intimated vide NSDL Circular No. NSDL/PI/2000/1240.

 

4A.2                Direct pay-out to Beneficiary Account

 

A facility is provided to the members to directly credit the pay-out to investors account. This can be executed through an application on the clearing front-ent enabling the members for capturing the requisite data and preparation of the files.

 

Clearing members will be required to provide a file to Clearing Corporation for effecting pay out to investors' accounts for a particular settlement type, settlement number and delivery type.

 

The file structure is described in detail in Annexure – 4.2

 

4A.3                Inter-Depository Transfer

 

The direct client account payout facility is further extended to credit payout of securities directly to the client account regardless of the depository in which securities pay in is received since online connectivity between the depositories has been established and operational.

 

4A.3.1 Clearing members shall be required to provide a file to Clearing Corporation for effecting pay out to client’s accounts.

 

4A.3.2 The clearing member can provide own settlement account details if the clearing member intends to receive full or part payout of securities, which is not identified for direct client account payout, in the settlement account with specific depository. This information can be provided in the same file. The clearing member is required to provide depository participant ID and depository participant client ID if the settlement account is with NSDL or CM Settlement account number or the Beneficial Owner’s account number entitled to receive the pay-out of securities if the settlement account is with CDSL.

 

4A.3.3 Clearing members are provided with an application in the clearing front end for the purpose of capturing the requisite data and generating the file. The same application can be used for this facility.

 

 

Item 5

 

5.1 In pursuance of Regulation 7.1 of the NSCCL Capital Market Regulations, it is hereby notified that the Guidelines for Good/Bad Delivery as presented below shall be used as guidelines for determining good/bad delivery.

 

SEBI APPROVED

 

GOOD/BAD DELIVERY NORMS

 

5.1.1    TRANSFER DEEDS

 

   No

       Description

    Good/Bad 

    1.

Transfer Deeds in the prescribed form and printed with the words "For the _________ Stock Exchange."

Stock Exchange emblem may or may not be printed.  Month and year of printing may or may not be put on the reverse of the Transfer Deed.      

      Good

     2.

Mutilated Transfer Deed with the signatures of the transferor,

witness, Directors and officer of the Company/ distinctive numbers/any material portion badly torn overwritten, or defaced

     

 

Typical Cases :

 

 

 

 

 

A) Material portion defined here only pertains  to the material portions at the time of delivery and not prospective one. For a buyer Consideration column, Specimen signature column, Name, Address, Occupation will also be the

material portion.

 

 

Material portion includes of transferor's name and signature, company name, folio no., certificate number, distinctive nos., number of shares, name and signature  of  the transferee, specimen signature  of transferee

 

 

B) Transfer Deed torn in the prospective material portion

· Torn and pasted with self-adhesive tape on which the required

details can be filled in without any difficulty.                  

       Good

 

· Transfer Deed torn in non material portion and held together

by a transparent tape                                                                           

      Good

 

· Transfer Deed torn end-to-end in any angle.                                                   

       Bad

     3.

Transfer Deeds with correction like erasure, overwriting,           alteration or crossing out in the material portion                                

Good if properly authenticated under the full signatures of all the  transferor

 

Under noted corrections / alterations are not considered as correction in material portion :

 

 

 

A) Minor spelling mistake in the following fields are valid without

the transferor's authentication provided the word can be properly identified :

a. Name of the Company.

b. Number of shares in words

c. Names of the Shareholders              

 

Illustration            Good                                    Bad

Telco                    Teelco                                 Tisco

Fifty                      Feefty                                   Feefteen

Ramesh                Rameesh                    Rajesh

       Good

 

B) Erasure, overwriting , alteration or crossing out in one or two characters in folio numbers.   

       Good

 

 

C) Erasure, overwriting , alteration or crossing out in one or two characters of ' Distinctive Numbers.'   

 

Good if certificate number does contain any erasure, overwriting alteration, or crossing out.

 

D) Erasure, overwriting , alteration or crossing out in one or two characters of ' Certificate Number '.                           

 

Good if distinctive number does not contain many erasure, over writing, alteration, or crossing out

 

E) Erasure, overwriting , alteration or crossing out in

Number of Shares in figures                                                     

 

Good if Number in words does not contain any erasure, overwriting, alteration, or crossing out.

 

F) Erasure, overwriting , alteration or crossing out in  one or two characters in Number of shares in Words.    

 

Good if Number of Shares in Figures does not contain any erasure, overwriting, alteration,

 

 

G) List of certificates numbers and distinctive numbers and distinctive numbers attached to transfer deed signed by all the transferors

Good

 

 

 

    4.

If the name of the transferor (s) in the share certificate & the name in the transfer deed(s) differs materially.                     

Bad

 

 

 

 

A)  Addition or Deletion of 1 or 2 alphabets.                            

Good

 

B)  Krishna Chandra Chelura - C C Krishna                            

Bad

 

C) Ashok Gupta - Gupta Ashok                                                          

Good

 

D) Corporation - Corpn/Corp.                                                

Good

 

 

 

    5.

Transfer Deeds signed as 'Choonilal' whereas in share certificate the name is spelt as 'Chunilal'.                     

Good

 

 

Other than any apparent difference in seller's signature must be accepted.

 

 

In case of apparent difference like S Rao signing as David.       

Bad     

 

In case S Rao signing as Subhash since the first letter of the signature matches with the initial.                                             

Good

    6.

Transferor's signature in English, Hindi or any one of the Scheduled languages in India.Assamese, Bengali, Gujarati,Hindi, Kannada, Kashmiri, Malayalam, Marathi, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu - as per Constitution of India - English Schedule ( Articles 314 (I) and 451).    

Good

    7.

Signature of the Transferor is in an Indian language other than the Scheduled languages of India or when the Transferor has affixed his thumb impression.

If attested by  any person authorised to attest signatures under the Seal/Stamp off his office               

Good

 

    8.

Transfer Deeds in respect of joint holdings signed by all the joint holders in any order.

Provided the signatures are against the relative names filled up in the Transfer Deed.

Good

    9.

Transfer Deeds without the name of the Company, name(s) of  Transferor(s), Folio No., share certificate no., Distinctive no., and  number of  shares being written.

Bad

 

   10.

In one lot with one Transfer Deed name on one certificate reading as "Ramesh C Talati" and on another certificate as "Ramesh Chunilal Talati" but Register Folios same on both.

Good

 

In one lot, separate transfer deeds are required for each registered folio.           

Good

 

If the transferor's name is identical and folios are different and there is only one transfer deed.                                                                          

Good

   11.

In one lot with one Transfer Deed names on different certificates reading as Ramesh Chunilal Talati and Talati Ramesh Chunilal but Register Folio is same.

Good

 

   12.

income Tax Authority or Collector signs as Transferor.(Number and Date of the relative Order necessary).

Good

 

   13.

Instead of Executor's signature, his Agent's signature is put on the Transfer Deed.

(Number and Date of Registration of Power of Attorney necessary).

Good

 

   14.

Executor's signature without his rubber stamp.(Number and Date of Registration of Power of Attorney necessary).

Good

 

   15.

In the case of Units transfer deed in the name of a Minor and signed by natural Guardian. (In the case of Court Guardian, a court order is required).

Good

  

Shares cannot be held in the name of a Minor unless accompanied by Court Order granting permission for sales/purchase which is beneficial to the Minor.

Good - If accompanied by the relevant Court Order for sale.

   16..

· Unless the transfer deed is duly certified and countersigned

by the Official Assignee.                                                                       

Good

 

 

 

    17.

Transfer deeds signed under Power of Attorney where the power given is subject to conditions                                                        

Bad

 

Transfer deed signed by Director of the Company and Under Board Resolution not mentioned on the front or the reverse of the transfer deed. ( Stamp of Introducing member is not required to be affixed on the reverse of the transfer deed)           

Good

 

Transfer deed signed by an authorised signatory under

Good  only if PA stamp of the introducing Member is mentioned on the reverse of theTransfer Deed.

 

Transfer deed signed by an authorised signatory of a custodian and the PA registration no. is mentioned on face or the reverse of the transfer deed.  (Stamp of Introducing member is not required to be affixed on the reverse of the transfer deed)

Good

 

Where the transfer deeds are signed by an authorised signatory under a Board Resolution and the stamp UNDER BOARD RESOLUTION is mentioned on the face or the reverse of the transfer deed. (Stamp of introducing member is not required to be affixed on the reverse of the transfer deed)         

Good

     18.

Transfer Deed signed by a custodian on behalf of a client · In the signature column the custodian does not put the stamp as  'Constituted Attorney' on behalf of the transferor

Bad

 

Transfer Deed signed by a Custodian on behalf of the client and in the signature column puts the stamp ' By Constituted Attorney to the transferor ' with the P/A number given on the face or reverse of the TD with the stamp and signature of the custodian. (Stamp of introducing member is not required to be affixed on

 the reverse of the transfer deed )                     

Good

 

     19.

Shares sold by FIIs and transfer deed signed by a Custodian on behalf of the FII.(Copy of RBI approval is not required to be attached ) 

Good

     20.

In case of GDR

 

 

· Photocopies of the RBI approval attached to the deliveries ;    OR

· If RBI approval number and date is mentioned on the transfer deed and

attested by the introducing member                                                      

Good

Good

 

     21.

Consideration amount and date of execution of the transfer deeds are filled in.                           

Bad

     22.

Transfer Deeds signed by or on behalf of a Company against which liquidation proceedings are pending.                                             

Bad

 

· Unless the Transfer Deed is certified and countersigned by the Liquidators.

 

Good

     23.

The name of the delivering broker with his SEBI Registration number and date not mentioned at the back of the Transfer Deed.     

Bad

 

In case the shares are delivered to the Clearing House by the Custodian and the Transfer deed bears the stamp of Custodian along with the Clearing Number of the Broker on whose behalf the shares are delivered. 

Good

 

The date should be the pay-in date/ delivery date only.

 

    24.

Shares held by a TRUST and Signed on the Transfer Deed as 'NAME OF TRUST - PROPRIETOR'.                               

Bad     

 

TD signed as "NAME OF TRUST - TRUSTEE"                                             

Bad     

 

Shares held in the name of a trust, if accompanied by a copy of the resolution or the relevant portion of the trust deed authorising the trustees to transact in securities on behalf of the trust.        

Good

    25

If shares held are duly registered by the company in the name of the HUF (Shares held by HUF and signed by KARTA)  

 

Good

   26

Transferor's signature witnessed by a person but his full name not given. as long as  the name and address of the witness are perfectly legible.                      

Good

   27.

Witness name, address and signature is in a language other than English specified by the Ministry of Finance.             Assamese, Bengali, Gujarati,Hindi, Kannada, Kashmiri, Malayalam, Marathi, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu - as per Constitution of India - English Schedule ( Articles 314 (I) and 451).

Good  

 

 

If signed in a language other than specified by the Ministry of Finance.   

Bad

    28.

Attestation stamp in any one of the Scheduled languages in India. Indian languages:

Assamese, Bengali, Gujarati,Hindi, Kannada, Kashmiri, Malayalam, Marathi, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu - as per Constitution of India - English Schedule ( Articles 314 (I) and 451).   

Good

    29.

Transferor's signature attested by a Bank official · only the designation mentioned.

Bad

   

· If the name, Designation of the attesting authority signing alongwith the complete address is  given.                                             

Good

    30

Attestation by Gram Panchayat or a Surpanch or Village Magistrate or Village Munsiff under his seal.                                      

Good

    31.

Signature attested by  any  person authorised to attest signatures with his full name and address with the Official Seal/Stamp of his office.               

Good

    32.

Transferor's signature is attested by a Notary Public.(The necessary seal, rubber stamp, adhesive stamps as prescribed for such attestation should be affixed in cases where Notary attestation is required i.e. In cases where Rectification of objections

is required due to signature differences).                                               

Good

    33.

33.       Transfer Deed is signed by the transferor

· Signature is clearly of a name different than the name of the transferor.

 

· If signature is same for two different shareholders under two different Transfer Deeds.                                                                        

Bad     

 

 

Bad

    34.

Marketable lot with more than five transfer deeds.

 

 Upto five transfer deeds used to make a marketable lot.                                  

Bad

 

Good

     35.

New shares which are issued on prorata basis and old shares standing in the folio and name of same transferor and accompanied by one transfer deed for a marketable lot.

(The new share dividend declared for the previous year i.e. the old new compensatory value (ONCV) would be payable on the entire market lot).                    

Good

    36

Company's name has been changed but it has not been corrected on the share certificate.                                            

Good

    37

Abbreviated name of a Company filled up in the transfer deed.If from the abbreviated name the identity of the company can be ascertained.  The name of the Company should be identifiable., e.g.  TELCO, TISCO, L&T, etc.                                          

Good

 

    38.

Exact position of  TDs to be attached on top of the certificate.TD should be placed on the top of the share certificate.         

 

    39.

Transferor and witness is  the same.                                         

Bad

    40.

Transfer Deeds in the prescribed form and name of a particular  Stock Exchange filled in or not.              

Good

 

    41.

Transfer Deed not in the prescribed form.

Bad

    42.

Witness and attesting authority identical.

 

Good

     43.

Transfer Deeds bearing signatures of witnesses, the address of the witness being in a different city or town or Centre other than that of Transferor or Transferee.       

Good

     44.

Prescribed Authority (ROC) seal overlapping and stamped twice.Even if the signature of the Registrar of Companies is partly printed and the date stamp is also partly printed but both the signature and the date should be apparent                 

Good

    45

The Endorsement of the Prescribed Authority (e.g. Registrar of Companies) bears the same date as the date from which the Register of Members of the Company is closed

Good

    46.

If the Endorsement of the Prescribed Authority (e.g. Registrar of Companies) bears a date prior to the date of issue of share certificate or the date of allotment of shares.

Provided the Endorsement of the Prescribed Authority bears a date of or after the date from which the Register of Members of the Company closed last.              

Good

    47

Transfer Deed endorsed by the Prescribed Authority on a date prior to closure of the Register of Members of the Company delivered after the date of closure of Register of Members.              

Bad

    48

Transfer Deeds accompanying debenture certificates or any other permissible listed security (other than equity) whether date-stamped by the Prescribed Authority or not.

Provided for the convertible portion a separate date-stamped Transfer Deed is delivered.                                                                    

Good

    49

Transferor's signature on the transfer deed with the date on which he has signed.

Good

    50

Witness is a Non-Resident and the address given is of a foreign country.

Good

    51

Distinctive numbers range "To" partly filled in the transfer deed., e.g. 4589201 - 300 etc.                                                                  

Good

    52

In the case of mutual funds, the ROC stamp and signature are missing (except in case of  Schemes of Unit Trust of India).                                  

Good

    53

Certificates with multiple folios per market lot attached to separate transfer deed (subject to guideline no. 35 above).                              

Good

    54.

Logo of the Stock Exchange on the reverse of the transfer deed missing.           

Good

    55

Attestation of the transferor's signatures is not mandatory.except in the case where the transfer has been returned by the company due to SIGNATURE DIFFERENCE.

Good

    56.

Units issued with the terms 'either or survivor', if signed by all holders    

If signed by any one of the holders                                                       

 

Good

Good

 

    57

Transferor's signature on the transfer deed is facsimile signature for Registered custodians.                                                                  

Good

    58.

Certified Transfer Deed

 

Provided the name and address of the Transferor the distinctive numbers of the shares covered by the Transfer Deed and date of certification are given.

Good

 

    59.

Any erasure or alteration in the Certified Transfer Deed. When authenticated by an authorised signatory of the Company.                           

 

Good

    60.

Certified Transfer Deeds and share certificates delivered in part for bargains in market trading unit.                                                                  

Good

    61

In case of shares under lock in-period, if the transfer deed date is prior to the lock-in period last date but the date of introduction into the market is after the last date of lock-in period.                         

 

If the transfer deed date is prior to the lock-in period last date and the date of introduction into the market is before the last date of lock-in period.                  

Good

 

 

 

Bad

 

 

 

    62.

Some companies allot record numbers for shares issued by them apart from distinctive number ranges. For these shares, if record number is filled up along with distinctive number ranges on the transfer deed. 

Good  

  62A

If only the record number has been filled up instead of distinctive number ranges on the transfer deed.                                                                                 

Bad

  62B

Transfer deeds ( dated June 01, 1997 and thereafter ) bearing rubber stamps on the reverse thereof other than those of members of the stock exchanges/clearing house/clearing corporations, SEBI registered sub-brokers and Remisiers registered with the stock exchanges.

Bad

 

5.1.2.   SHARE CERTIFICATES

 

 

 

 

   No

Description    

Good/Bad 

 

   63

Name of the company or emblem is not readable on the common seal or there is no common seal on the share certificate.                                                    

Good

 

   64

The last date for payment of call has expired and the call has not been paid or if the call has been paid, the necessary Call Receipt has not been attached.    

 

The call  payment receipt with the stamp of the Bank before or on the due date if attached to the securities good delivery for three months from the last date of call payment or next book closure announced by the company whichever is later.

 

All call payment receipts after due date must be endorsed as ' cheque / draft realised ' by the Bank / Co / Registrars.                                                            

 

Where the closure of the register of members fall within the period of 3 months from the due for payment of call money, call money receipt valid until the closure of Register of Members occurring after the first such closure                                 

Bad

 

 

Good.

 

 

 

Good

 

 

Good

 

   65

All securities with stickers issued by the companies in lieu of endorsement

Good

   66

If call money paid but not endorsed on share certificate even after the book closure but transfers affected after the call payment date.                                  

Bad

   67

If the final call is endorsed but the initial or the initial and the second call not endorsed. ( i.e. if marked  "FULLY PAID" )                                        

Good

   68

In case of fully convertible debentures, after the debentures have been converted into equity, if the call money endorsement has been done only for the equity portion and not for the debenture portion or vice versa.

Good

    69

Call paid endorsements made by the company with call amount and signature of the Authorized Signatory with or without the Rubber stamp of the Company and date of payment of the call.                                                                                          

Good

    70

In the case of partly paid shares, when a call has been made but not paid and delivery effected during the period of ten days before the last date fixed for payment.            

 

Bad

   

If the call receipts are attached to the documents                                              

 

Good

    71

Application Receipts and Call money receipts not bearing bank stamps and payment details .            

Bad

   72

Any significant correction, erasure, overwriting, crossing out or alteration in the quantity of the shares, in the last registered holders name or in any material particulars on the share certificate.                                                                    

Bad

 

Unless the Authorised Signatory who has signed on the certificate, authenticates  the correction Or the correction is initialed and authenticated by any other officer under the Company's rubber stamp.                                                                           

Good

    73

Certificates badly torn as is not to be in a deliverable condition or share certificate torn through and through or badly torn as to obliterate or render illegible or create the impression of cancelling the numbers or directors or other signature or the date or any other particulars or if it is written upon or damaged or mutilated by advertisements, printing, rubber stamp or otherwise or if a material part of the certificate be torn out or cut off.                                   

Bad

    74

Share certificates defaced or mutilated in portion:                                  

Bad

 

The following will be considered as material portion in the case of share certificate:

 

 

 

 

 

(I) Share certificate torn end to end and pasted with transparent self-adhesive tape

Bad

 

(ii) Where shares have been transferred to a new holder and if torn at the original holders name portion                                                                                       

Good

 

(iii) Folio number and name overwritten in one or two characters and not authenticated by the authorised signatory                                                                                  

Good

 

 

iv) If the share certificate is torn at the company name portion but is decipherable

Good  

 

(v) Corrections in transfer Number or Date of transfers, if legible and not authenticated.  

Good

 

vi) Share Certificates with bar codes not concealing any material information.    

Good

    75

If the name of the Company has been disfigured in the body of the share certificate so as to affect it materially.                                                                   

Bad

 

If the name of the company is identifiable.                                                         

Good

    76

Certificates in the case of UNITS discharged by the transferor for purpose of repurchase and then cancelled by him and initialed.                                           

Bad

    77

Share certificate contains one name but the transfer deed consists of two signatures. 

Bad

  

If both the signatures on the transfer deed are identical in nature or can be identified as signature of the same person.  If the transferor has signed twice but has struck off the 2nd signature                                                                                              

Good

    78

Share certificate contains name of one transferor but transfer deed contains two names and signatures respectively.                                                                    

Bad

    79

Preferential/promoters quota shares under lock-in period delivered  which are not transferable.                                                                                         

 

Bad

    80

Share certificate issued without the signature of Secretary/Authorised signatory.     If the shares are transferred subsequently and the authorised signatory has signed against such transfer.

Bad

 

Good.

 

 

    81

Signature missing in the initial column but signed by Authorised signatory in the required column on the reverse of the certificate.                       

Good

 

    82

Endorsement effected on the reverse of the certificate and struck off and again endorsed.        

Good subject to proper authenti-

cation by the Company by putting a round stamp of the Company.

     83

Certificate with company's old registered office crossed out and new address stamped without authentication.                                                            

Good

     84

Certificate without mentioning the place of issue.

Good

     85

Revenue stamp affixed on the certificate concealing any material portion of the certificate.

Provided any material portion like locking period date, NRI details are not affected

Good

     86

Revenue stamps affixed/impressed by the Company on the share certificate has come off.                                                                                                         

Good

     87

Any alteration or erasure or correction without initials in the transfer endorsement on the back of the share certificate as for example made in the year 1960 and subsequently the shares have again been transferred by the Company, say in 1961.

Good

     88

Share certificates with irrelevant or extraneous rubber stamp or writings on the scrip.

Provided the rubber stamp or the writings does not affect any material portion of the scrip.                                                                                                   

Good

     89

Increase or decrease of the Capital and if the certificate does not carry the endorsement on the face of the certificate.                                                        

Good

    90

Absence of  holder's discharge on the Letter of Allotment.                    

Good

    91

Share Certificate and Transfer Deed not attached together.                               

Bad

    92

Shares standing in the name of Non-Resident Individuals.

Provided   the declaration stamp as per the RBI guideline is affixed and

countersigned  by the introducing member                                                        

Good

    93

Name of the holder printed in two lines which looks like joint holding or

one line of address printed and  looking like second holder.                              

Good

    94    

Lock in period mentioned in the certificate, without specific date of release of lock in.

Bad

    95

Shares issued in the name of Sole Proprietor/ Partnership firm signed by the Proprietor/Partner.       

Units/debentures issued in the name of Sole Proprietor/ partnership firm signed by the Proprietor/partner                                                  

Bad

 

 

Good

    96

In case the shares of a company are not pari passu with the existing equity shares of the company in two financial years then new share dividend declared for the previous year i.e. the old new compensatory value(ONCV) for two years has to be paid.

The full dividend declared will have to be paid (interim + final)  

 

                                                           

 

 

 

 

 

 

 

 

96 5.1.3                       MISCELLANEOUS

 

No.

Description

    97

Validity period of Company Objection by the last buying broker to be notified to the exchange/introducing broker is 12 months from the date of the objection memo.

    98

Objections must be accompanied with Share Certificates.

    99

Shares lodged for transfer after book closure (but before one year from the date of stamping the transfer deed) are returned under objection can be lodged as company objection.

   100

Where the shares have been duly transferred by the company in the name of the transferee, and thereafter the company sends a letter informing transferee that the shares have been transferred based on fraudulent documents, such cases can be lodged as company objection subject to the following conditions and procedure :

 

· In cases where the company has transferred certificates which are fake and later sends a letter informing that the shares have been transferred on fraudulent certificates, such cases will NOT be treated as company objections and company will be responsible for the transfer.

 

· In cases where the shares are under stop transfer, stay order, non transferable ( lock - in period ) or shares are partly paid and the company has transferred the shares and later sends a letter informing that the shares have been transferred on fraudulent documents, such cases will NOT be treated as company objections and the company will be responsible for the transfer.

 

· In cases where the certificates are genuine but the transfer deed is forged ( i.e. the company has transferred the shares in good faith ) the shares can be accepted as company objection. In such cases the company should necessarily enclose the copies of both sides of the transfer deeds based on which shares were transferred by the company in favour of the holder and which later on has been found to be based on forged documents, and all subsequent transfers thereafter alongwith the objection.

 

Procedure :

( In order to simplify the understanding of the procedure, the following illustration has been used :

 

A-- > B -- > C -- > D -- > X -- > Y -- > Z

 

The shares were first sold through 'A' in the market. After passing through 'B' and 'C' the shares were lodged by 'D' to the company for transfer. After receiving the shares duly transferred from the company in his name 'D' sold the shares in the market. These shares after passing through ' X' and 'Y' are finally sent by 'Z' to the company for transfer in his / her name. After receiving the shares from the company duly transferred in his name, 'Z' has received a letter from the company stating that the shares transferred in the name of 'D' were based on fraudulent documents.

 

· 'Z' will report the objection alongwith the company objection against 'D'

· 'D' will rectify /replace the shares within 21 days as per the BDC procedures

· 'D' may in turn lodge the bad delivery for rectification through the BDC against 'A'

 

The validity period of reporting such cases will be 36 months from the date of latest transfer by the company ( in the above example 36 months from the date the shares were transferred in the name of 'Z' ).

The company will also furnish copies of both sides of transfer deed based on which shares were transferred in favour of 'Z' and 'D' along with the objection memo.

    101

In case of joint holding, and in the event of death of any of the holders, transfer can take place on the basis of the death certificate accompanying the transfer deed only for a period of two years from the date of the death or ensuing book closure, whichever is later.

 

The Introducing member of a recognised Stock Exchange may certify / attest copy of the death certificate and also issue an identity certificate in case where the name of the deceased on the share certificate is not identical with the name of the death certificate.

    102

While rectifying objections due to signature differences, a fresh signature by the transferor along with attestations is mandatory if the same transfer deed or a fresh transfer deed along with attestation is mandatory.

Clarification : Members are required to submit fresh transfer deeds duly attested for all signature difference cases (even in case of signature difference of authorised signatory, fresh transfer deed signed by a different authorised signatory also needs to be attested).

    103

In case Rights/Bonus shares tendered as corporate benefits are reported as bad delivery, if it is odd lot, the value of shares based on the rate prevalent on the day of reporting bad delivery will be paid.

    104

Rectification/replacement of transfer deed under objection should be in market lot only (even if transfer deed under objection is submitted in non-market lot)

    105

If  Jumbo transfer deed is submitted as company objection, original transfer deeds need not be returned by the receiving member

    106

When documents are returned under  signature difference, the transfer deed can be attested by the introducing member. If the introducing member is a corporate, the Director or authorised signatory can attest the transfer deed, under his company's stamp, with SEBI Registration Number .

    107

For reporting as company objections, the transferee portion of the transfer deed should be duly filled in.

    108

For reporting fake/forged shares as company objection, the following documents are required:

 

A. If they are returned as objection from the company due to the above reason :

· company objection memo stating that the shares are fake/forged

· copies of both sides of the transfer deeds

· copies of both sides of the share certificates

B. Otherwise one of the following documents are required :

· public notice given by the company/registrar

· notification from any stock exchange

· letter of intimation from the company to stock exchange

    109

For reporting missing/lost/stolen shares as objection the following documents are required:

 

A.  If they are returned as objection from the company due to above reason :

·    company objection memo stating that the shares are missing/lost/stolen accompanied by a   v 

     copy of Court Order or FIR or copy of acknowledged police complaint

·    copies of both sides of the transfer deeds

·    copies of both sides of the share certificates

B.  Otherwise one of the following documents are required :

· public notice given by the company / registrar

· notification from any stock exchange

· letter of intimation from the company to stock exchange.

 

Clarifications :

1. In cases where duplicate shares have been issued to a third party under the provisions of Section 108 (1) A of the Companies Act, the company should also provide the name and address of the third party to whom the duplicate shares have been issued along with the date of request for duplicate shares by the third party.

 

2.  In cases where the companies have issued duplicate certificates for missing/lost/stolen shares, the receiving member is not required to submit FIR/ court order copes, while reporting company objections.

   110

110.     Attestation is required where signature of transferor is in an Indian language other than the Scheduled languages in India or when the transferor has affixed his thumb impression ( guideline no. 7 ). In other cases, attestation is compulsory only when shares come under objections due to signature difference.   Hence guideline Nos. 28, 29, 30, 31 & 32 apply only to transfer deeds which come under objection due to signature difference.

 

In cases where the seller delivers the shares in market lots but the receiving member lodges the shares for transfer with a jumbo transfer deed and the receiving member is not in a position to return all the original transfer deeds submitted with each market lot whilst reporting company objection, the receiving member is required to give an undertaking indemnifying the introducing member in the event of the said original transfer deed(s) being misused at any future date in the prescribed form 6J.

 

 

 

 

 

 

 

 

Item 5A

 

In pursuance of Regulation 6.12.1 of the Capital Market Regulations, members are required to affix a stamp bearing the name and SEBI registration no.(code) of the clearing member and other details on the reverse of the transfer form in respect of the securities delivered to the clearing house. Members are required to use one of the formats specified below.

 

The formats of the stamp to be affixed on the reverse of the transfer form is given below:

 

Format 1

 

Member Name    :       

                                   

SEBI Reg. No.    :                 Pay-in Date       :            

Settl.Type & No. :                  Client A/c. No.:

 

Format 2

Member Name    :       

 

SEBI Reg. No.    :                 Pay-in Date       :

 

Settl.Type & No. :

 

Delivery No.  :                      Client A/c. No.  :

                                                                                   

The dimensions of the stamp shall not exceed 4 inches by 2 inches.

 

Members are required to use either Format 1 or Format 2 as given above for all securities delivered through the clearing house. All details prescribed in Format 1 and Format 2 are  mandatory  with the exception of the details pertaining to Client A/c. no. which is optional. In case members are not using the Client A/c. no.  field,  the same has to be filled in as 'XXXX'.

 

Members proposing to use Format 2 are required to intimate the same to the clearing house in writing failing which it shall be assumed that they shall be using Format 1.

 

 Members are required to give seven days prior notice to the clearing house in writing in case they propose to change from one format to another at a future date.

 

Any violation in the use of the above formats shall be treated as bad delivery.

 

 

 


Item 5B

 

In pursuance of Regulation 7.1 of the Capital Market Regulations, it is hereby notified that the Guidelines for Good/Bad Delivery as presented below in addition to those mentioned in Item 5 shall be used as guidelines for determining good/bad delivery.

 

GOOD/BAD DELIVERY NORMS

 

S.No.

Description

Good/Bad

   

 

 

    1.

Securities with transfer deeds bearing the name/rubber stamp of the defaulter/surrendering member/expelled member as an introducing member/delivering member on the Exchange

Bad

    2.

Securities with transfer deeds bearing the name/rubber stamp of defaulter of some other exchange as an introducing/delivering member and notified as bad delivery by the Exchange                                                               

Bad

    3.

Delivery of underlying shares of GDR/ADR in physical mode    

Bad

    4.

Delivery of shares by institutional investors viz. domestic financial institutions, banks, mutual funds, foreign institutional investors and overseas corporate bodies in physical mode after a specified date                           

Bad

    5.

Delivery of shares of a scrip by any investor, falling under the list of compulsory trading and settlement in demat mode in Regular Market, after a specified date  

Bad

    6.

Delivery of shares by an individual/HUF in LP Market exceeding 500 shares on a trade day                                                                         

Bad

    7.

Delivery of shares by any person other than individual/HUF in LP Market                                                                                                

Bad

    8.

All share certificates bearing the stamp "surrendered for dematerialisation"

Bad

    9.

Validity of objection where SEBI Approved Good/Bad Delivery

 Norm 97 and Norm 100 are applicable                       

Norm 97 is enforceable

                       

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 6

 

In pursuance of Regulation 7.6.1, 7.6.2 and 8.1 of the Capital Market Regulations, delivery units are prescribed as under:

 

6.1       Delivery unit for Regular Market Deals

 

Delivery unit for Regular Market Deals in non-depository (physical) or in depository mode shall be the lot size prescribed for each security of the Capital Market Segment of the NSE.

 

6.2              Delivery in prescribed units for Regular Market Deals in Non-Depository Mode

 

One certificate for the exact quantity of the delivery unit or two or more certificates making up in the aggregate the delivery unit accompanied by one or more transfer deed subject to not more than five transfer deeds for the exact delivery unit shall be delivered in settlement of settlement obligations in securities for the Regular Market Deals.

 

6.3       Delivery unit for Regular Market Deals in Depository Mode

 

Delivery unit for Regular Market in depository mode shall be lot size one (1) for each security of Capital Market Segment of the NSE.

 

6.4       Delivery unit for LP Market Deals

 

Delivery unit for LP Market Deals shall be equivalent to the size of the deal or 500 shares, whichever is lower.

 

6.5        Delivery in prescribed units for LP Market Deals

 

One certificate for the exact quantity of the delivery unit or two or more certificates making up in the aggregate the delivery unit accompanied by one or more transfer deed subject to not more than five transfer deeds for the exact delivery unit shall be delivered in settlement of settlement obligations in securities for the LP Market Deals.

 

6.6         Delivery unit for IL Market Deals in Depository Mode

 

Delivery unit for IL Market Deals in depository mode shall be lot size one (1) for each security of Capital Market Segment of the NSE.

 

 

 

 

 

 

 

 

 

 

Item 7

 

In pursuance of Regulations 7.15 and 9.3 of the Capital Market Regulations, valuation price for bad deliveries and for failure to give or take delivery are hereby specified as under:

 

7.1       Valuation Price for Bad Delivery for Regular Market Deals

 

The valuation price for securities which constitute bad deliveries, shall be the closing price of such securities, on the trading day preceding the settlement day unless prescribed otherwise from time to time by the relevant authority.  . For the purpose of this clause, the closing price shall be the price as announced by the Specified Stock Exchange and the day of valuation shall be the day as decided by the relevant authority of the Clearing Corporation from time to time.

 

7.2       Valuation  Price for Bad Delivery for LP Market Deals

 

The valuation price for securities which constitute bad deliveries, shall be the closing price of such securities, on the trading day preceding the day of valuation unless prescribed otherwise from time to time by the relevant authority. For the purpose of this clause, the closing price shall be the price as announced by the Specified Stock Exchange and the day of valuation shall be the day as decided by the relevant authority of the Clearing Corporation from time to time.

 

7.3       Valuation Price for failure to deliver for Regular Market Deals.

 

The valuation price for securities which were not delivered on the settlement day for securities, shall be the closing price of such securities, on the immediate trading day preceding the pay-in day for the securities unless prescribed otherwise from time to time by the relevant authority. For the purpose of this clause, the closing price shall be the price as announced by the Specified Stock Exchange and the day of valuation shall be the day as decided by the relevant authority of the Clearing Corporation from time to time.

 

7.4       Valuation Price for failure to deliver for LP Market Deals

 

The valuation price for securities which were not delivered on the settlement day for securities, shall be the closing price of such securities, on the  preceding the day of valuation unless prescribed otherwise from time to time by the relevant authority.  For the purpose of this clause, the closing price shall be the price as announced by the Specified Stock Exchange and the day of valuation shall be the day as decided by the relevant authority of the Clearing Corporation from time to time.

 

 

 

 

 

 

 

 

 

Item 8

 

In pursuance of Regulations 7.15, 7.16, 9.3, 9.5, 9.8, 9.9A, 12.14 and 15 of the NSCCL Capital Market Regulations the penalties for failure to give good delivery or for failure to give or take delivery of securities, or for non rectification of defective documents, or failure to pay funds or for margin/security deposit shortages or for client code modification / non-reporting of  non-custodial institutional trade (NCIT) or non allocation of institutional (INST) trades and non-confirmation of custodial trades by custodians are hereby specified as under :

 

8.1       Failure to give or take delivery of securities in respect of cleared deals.

 

A processing charge for delayed delivery will be levied on the value of securities delivered short including for auction short deliveries. The charges will be computed from the day on which securities are due to be paid in upto

 

(i)         the day on which the securities are bought in or

(ii)        till auction settlement is completed or

(iii)       where auction is partially successful or not successful and the deal is deemed closed out or when the deal is squared off and the corresponding funds adjustments are completed, whichever is later;

 

The processing charges as per the schedule given below:

 

S. No

Failure to deliver securities

Penalty Charge % per day

Action

(a)

Value Rs. 10 lakhs or more

0.05

The trading facility of the member shall be withdrawn where funds availability confirmation  on account of valuation debit is not received from the Clearing Bank and the securities pay-out shall be withheld.

(b)

Value less than Rs. 10 lakhs

0.05

No action

 

8.2       Failure to give Good Delivery

 

A processing fee for delayed good delivery or bad delivery will be levied on the value of securities in bad/fake  delivery.

 

In case of bad deliveries rectified, delayed good delivery processing charges will be at the rate of 0.09 % per day computed from the day on which securities were originally due to be brought in upto the day on which the securities are replaced/rectified.

 

In case of bad deliveries not rectified, bad delivery processing charges will be @ 0.09% per day computed from the day on which securities were originally due to be brought in upto (i) the day on which the securities are brought in or (ii) till  auction settlement is completed or (iii) where auction is partially successful or not successful and  the deal is deemed closed out or (iv)  when the deal is squared off and the corresponding funds adjustments are completed, whichever is later.

 

In case of auction bad deliveries and rectified / replaced objection cases which are reported as bad delivery,  the penal interest will be of 0.09% per day from the rectification date till the date of closing out.

 

8.3       Late Pay-in of Securities (Physical)

.

Charges for late pay-in of securities in Normal/Auction/Bad delivery/Company objection & Odd lots.

 

Members/Custodians desiring to deliver to the Clearing House securities at any time beyond the scheduled notified time that may be announced by the Clearing house from time to time would be required to pay charges for the special facility and services rendered as given hereunder:

 

S.No.

Description

Charges

      1.

 

Delay upto one hour after expiry

Re.0.25 per Share /Debenture /Bond/Unit of scheduled time    or Rs.500/- per delivery, whichever is higher subject to a maximum of Rs.10,000/-.

      2.

Delay beyond one hour for additional extended time after expiry of scheduled time

R.0.50 per share/ debenture/ bond/unit or Rs. 1000/- per delivery, whichever is higher subject to a maximum of Rs.20,000/-

 

The above facility will be extended only under exceptional circumstances and if it does not affect the other scheduled operations of the Clearing House / Clearing Corporation           

 

8.4       Processing Fee - Late Pay-in (demat).

 

0.5% of the delivery value obligation subject to a maximum of Rs.10,00,000/-

 

The processing of late pay-in of demat securities shall be considered only on the specific circumstances and at the discretion of the relevant authority.

 

 8.5      Incorrect claim of corporate benefits          

 

A processing fee shall be levied on the receiving member for incorrect/invalid/incomplete/ double corporate benefits claimed by the receiving member as per the schedule given below:

 

 Wrong claims of dividend, bonus, interest etc.

Rs. 100/- per claim

 Same set of shares reported twice under

10% of value of shares objection reported under objection subject to a minimum of Rs. 5,000/- per claim

 

 

 

8.6       Incorrect undertaking

 

A processing fee shall be levied on the introducing member (per inward no.) for incorrect undertaking submitted by the introducing member as per the schedule given below:

 

  Incorrect undertaking on form 6-I                         

10% of the value of shares reported under objection, subject to a minimum of Rs. 5,000/- per claim.

 

8.7       Late withdrawal of company objection

 

Processing fee for late withdrawal shall be levied for all withdrawals where a member has not withdrawn the invalid/incorrect objection/corporate benefits claim on the scheduled withdrawal date, for the following reasons:

 

8.7.1   The shares under objection have not been introduced by the member on the Exchange, however he is not able to produce the delivery slip / delivery details statement on the scheduled withdrawal day.

 

8.7.2    Where the IM had not approached the Clearing House on the scheduled withdrawal date on account of oversight/mistake, the processing fee for late withdrawal shall be  at the rate of Rs. 2 per share subject to  a minimum of Rs.200/-

                                               

Members wanting to avail 'late' withdrawals will be required to affix pre-paid coupons for the late withdrawal fee , at the time of reporting the same. Acceptance of such late withdrawals shall be subject to approval only.

 

8.8.      Failure to pay funds

 

8.8.1                Failure to pay funds in respect of cleared deals.

 

Members failing to fulfill their funds obligations in  (all markets including the valuation debit raised on account of securities shortages) to Clearing Corporation shall be subjected to a penalty charge mentioned herein below:

 

S. No

Failure to pay funds

Penalty Charge % per day

Action

a)

Value Rs. 5 lakhs or more.

0.07%

 (Refer 8.8.2)

b)

Value less than Rs. 5 lakhs.

0.07%

 (Refer 8.8.2)

 

8.8.2                Withholding of Securities and Disabling from Trading

 

Securities pay-out, due to the clearing member who has defaulted in meeting with the liability of funds, shall be withheld and trading and/or clearing facility of the said clearing member may be withdrawn. The amount of shortages in a settlement for a clearing member shall be valued at the closing price as of date that the relevant authority deems necessary and fit.

 

The above provisions shall apply if the amount of shortages in a settlement for a clearing member is :-

1.      Equal to or greater than Rs. Five (5) lakhs at the end of  pay-in.

2.      Equal to net cumulative funds shortage of Rs. Two (2) lakhs or above and was short for more than six (6) occasions in the past three (3)  months on any given day

In case, the member is disabled on account of (2) above, on making good the shortage amount, the member shall be permitted to trade with reduced exposure limits as per the slabs mentioned below:

 

Cumulative Funds Shortage (in Rs.)  Exposure Limit allowed (%of current exposure limit)

            2-5 lakhs                                                                      80%

            >5  lakhs                                                                      60%

 

If the cumulative funds shortage for the next ten settlements is less than Rs. 2 lakhs, the exposure limits shall be restored.

 

The exposure limit may be restored if a member provides a deposit, by way of cash, fixed deposit receipts, bank guarantee, equivalent to the cumulative funds shortage as the 'funds shortage collateral' in the clearing account. Such deposit will be kept with the Clearing Corporation for a period of ten settlements and will be released only if no further funds shortages are reported for the member in next ten consecutive settlements. Members may further note that there shall not be any exposure benefit nor any interest payment on this amount so deposited as 'funds shortage collateral'.

 

8.8.3                    Recovery of funds due through liquidation of securities withheld.

 

The funds defaulting member will be allowed such time as may be permitted by the relevant authority depending upon the facts of the case to bring in the amount in default. If funds are not brought at any time by the defaulting member  the Clearing Corporation at its discretion will proceed to close out  securities in the normal / auction market.

 

8.8.4                Declaration of a Defaulter

 

If the member does not bring in the amount by the time permitted by the relevant authority, and continues to default thereafter, the relevant authority may proceed to declare him a defaulter.

 

8.9                  Gross Exposure & Turnover Violations

 

Members violating the allowable Gross Exposure and Turnover limits shall be subjected to the following penalty structure:-

 

S. No

Gross Exposure and Turnover violation

Penalty Points

Action

(a)

Value Rs. 5 lakhs or more

4

Trading facility of the member shall be withdrawn

(b)

Value less than Rs. 5 lakhs

2

Trading facility of the member shall be withdrawn

 

8.10                 Margin Shortages

 

Members not fulfilling their Daily Margin and/or Additional Margin requirements shall be subjected to the following penalty structure.

 

S. No

Margin shortages

Penalty Charge % per day

Action

(a)

Value Rs. 5 lakhs or more

0.07

Trading facility of the member shall be withdrawn

(b)

Value less than Rs. 5 lakhs

0.07

If the member is short in fulfilling the margins obligation on more than three times in the last six occasions.*

 

* Members may note that in case they are short in margins payment of Rs.50, 000/- and above on more than three times in the last six occasions, their trading facility   shall with be withdrawn.

 

8.11                 Security Deposit Shortages: Members not fulfilling the security deposit requirement for continued membership requirement shall be subjected to the following penalty structure.

 

S. No

Security Deposit Shortages

Penalty Charge % per day

Action

(a)

Value Rs. 5 lakhs or more

0.09

The  trading facility of the member shall be withdrawn

(b)

Value less than Rs. 5 lakhs

0.09

The member shall be given a week’s time to replenish the shortfall in security deposit failing which the trading facility of the member shall be withdrawn.

 

8.12                 Penalty Points

 

Penalty will be imposed over and above penal interest and other charges as under.Penalty points will be calculated for each settlement and cumulated for all the settlements over each calendar month. At the beginning of the first settlement period of each month the cumulated points will be reset to zero. 

 

Four (4) penalty points will be charged in respect of the following violations :-

 

1)      client code modifications,

2)      non-confirmation of custodial trades,

3)      non-reporting of non-custodial institutional trades (NCIT)

4)      non-allocation of institutional (INST) trades, 

 

Further, the following penalties (monetary penalty) shall be imposed for cash market segment during each calendar month.

 

 

Penalty Points

Penalty

0  to 20

No action

21  to 30

Reprimand letter

31 to 50

A fine of Rs. 2000/- per point over 30 points

51 to 100

A fine of Rs. 5000/- per point over 50 points plus Rs. 40,000/-

Over 100

Allowable exposure to be reduced by 75% for 10 settlements in Normal Regular Market.

 

In addition to the above, a penal interest at the rate of 9 basis points for each day of default shall be levied on the members who have not paid the penalty imposed on them.

 

8.13                 Charges for rectification of errors committed by Clearing Members

 

A processing fee penal charge shall be levied for rectification of error that has been committed by the clearing member, . The fee  for all such error rectification that results in credit greater than Rs. 1,000 / - to be passed on to the clearing member, would be levied on the clearing member receiving the benefit.

 

Amount of credit received by the clearing member

Rectification charges to be levied

(Amount in Rs.)

Rs. 1000 to Rs. 10,000

100

> 10,000

1000

 

The processing fee  will be required to be paid in advance by the clearing member, by way of a cheque, drawn in favour of 'National Securities Clearing Corporation Limited', .

 

 


Item 9

 

In pursuance of Regulation 10 of the NSCC Capital Market Regulations, deemed closing out prices ('squaring off') are hereby specified as under:

 

9.1       Closing Out where securities cannot be bought-in

 

When the Clearing Corporation is satisfied that securities cannot be bought in the settlement for Regular Market Deals, obligation in such security shall be deemed to be closed out at the following price:

 

9.1.A               In the case of failure to give delivery for Normal Market

 

Any shortages in Normal Market that cannot be bought in the Auction Market shall be closed out at the highest price prevailing in the NSE from the day of trading till the day of closing out or 20% above the official closing price on the auction day, whichever is higher.

 

9.1.A.1                        Compulsory Close-out of securities not in ‘No-delivery’

 

‘No delivery’ is abolished in respect of book-closure / record date for corporate actions such as issue of dividend, bonus securities, AGM, and EGM for securities traded in the compulsory dematerialised mode.  

In case a company announces any of the aforesaid corporate action, the Clearing Corporation shall not announce a ‘No-Delivery’ in case trading of such securities immediately after becoming ex-benefit. All cum-transactions which cannot be auctioned on cum basis shall be compulsory closed out. Similarly, all cases of short deliveries where the cum basis auction pay out which would otherwise have been after the book closure / record date shall be closed out at the highest price prevailing in the NSE from the day of trading till the day of closing out or 10% above the official closing price on the auction day, whichever is higher.

The no–delivery period shall continue to be applicable in case of bonds, debenture and securities deliverable in physical form.

Members may kindly note that security in Limited Physical Market shall be withdrawn from trading ten days prior to book closure/record date and re-enabled for trading ten days after the book closure/record date.

Ref. SEBI’s circular no. SMD/Policy/Cir-08/2002 dated April 16, 2002.

 

9.1.A.2                        In the case of non rectification/replacement for bad delivery

 

At the highest price prevailing in the NSE from the  day of trading  till the day of the closing out or 20% above the official closing price on the auction day, whichever is higher.

 

9.1.A.3                        In the case of non rectification/replacement for objection cases

 

In the case of non rectification/replacement for objection cases at  20% above the official closing price on the auction day.

 

9.1.A.4                        Rectified / Replaced bad deliveries reported as bad delivery (Rebad delivery)

 

Rectified / replaced shares reported as bad delivery (Rebad delivery) shall be closed out at the highest price prevailing in the NSE from the day on which the trade was originally executed till the day of the closing out or 10% above the official closing price on the auction day whichever is higher.

 

9.1.A.5                        Company objection cases reported as bad delivery

 

Rectified /replaced company objection reported as bad delivery shall be closed out at 10% above the official closing price on the auction day.

 

9.1.A.6                        Close Out  price for deleted security

 

Security for which trading has been discontinued on the Exchange (hereinafter referred to as deleted security), close out shall be the last 26 weeks average trade price on the exchange

 

9.1.A.7                        Deleted security on account of payment of additional call money

 

In the case of securities for which trading has been discontinued on the Exchange on account of payment of additional call money  (hereinafter referred to as deleted security), the security where the respective call money has been paid (hereinafter referred to as new security)  will be considered to arrive at the closing price.

 

Company objections received in the 'deleted security' will be required to be reported in the new security symbol / series. In case the 'new security' is not available for the reason of such security not being introduced  for trading on the Exchange / trading being discontinued on the Exchange, company objections will be required to be reported in the 'deleted security' and close out price will be at the last 26 weeks average trade price on the exchange.

 

9.1.A.8                        Deleted security on account of payment of redemption:

 

In the case of securities for which trading has been discontinued on the Exchange on account of redemption (hereinafter referred to as deleted security), the security (with the new face value after redemption) introduced for trading by the Exchange (hereinafter referred to as new security) will be considered to arrive at the closing price.

 

Company objections received in the 'deleted security' will be required to be reported in the new security symbol / series and members will be entitled to claim redemption amount as corporate benefit.

 

In case the 'new security' is not available for the reason of such security not being introduced for trading on the Exchange / trading being discontinued on the Exchange on account of full redemption, company objections will be required to be reported in the 'deleted security' and the close out price will be at the last 26 weeks average trade price on the exchange.

 

9.1.A.9                        Deleted security on account of merger / amalgamation / hive off / scheme of restructuring

 

In the case of securities for which trading has been discontinued on the Exchange on account of merger / amalgamation/ scheme of restructuring (hereinafter referred to as 'deleted security'), the security with which  the deleted security is merged / amalgamated / hived off / restructured into (hereinafter referred to as 'new security') will be considered to arrive at the closing price.

 

Closing price for such 'deleted security' will be the official closing price of the new security on the auction day prevalent on the Exchange.

 

In case where the price of the 'new security' is  not available for the reason of such security not being traded on the Exchange, the close price for such deleted security will be at the last 26 weeks average trade price on the exchange

 

In case, where more than one security (hereinafter referred as 'additional securities') is being given by the company in lieu of the 'deleted security', the claim of company objection lodged for such 'deleted security' shall be settled as follows:

 

(i) if such 'additional securities' are traded on the Exchange, in the ratio in which they have been issued by the company.

(ii) If any one or more of these 'additional securities' are not traded on any Stock Exchange, no claim shall arise, for such security not traded.

(iii) If any one or more of these 'additional securities' are not traded on the Exchange but traded on some other Stock Exchanges, the relevant closing price of such securities shall be the closing price on the regional exchange, to be notified by Clearing Corporation.

 

Members may claim such 'additional securities' as corporate benefit.

 

In case of securities undergoing scheme of amalgamation/ restructuring wherein the exchange ratio agreed to by the companies are in fractions/decimals, claim of company objection shall be settled as follows:

 

(a) The no. of shares (arrived at as per the exchange ratio after excluding the fraction/decimal portion) of the new scrip

 

(b) The fractional part, to be claimed as corporate benefit, which will be squared up as per the valuation given in Annexure 9.1 (rounded off to the nearest rupee).

 

9.1.A.10          Close Out price for bonds

 

9.1.A.10a In case of failure to give delivery, non rectification/replacement of bad delivery, rectified/replaced bad delivery subsequently reported as re-bad, auction non-delivery, and auction delivery reported as bad delivery, closing out price will be the highest rate prevailing on the Exchange from the first day of the relevant trading period till the day of closing out or 5% over the official closing price on the auction day,  whichever is higher.

 

9.1.A.10b In case of non rectification / replacement of company objection and rectified/replaced company objections reported as bad delivery, closing price will be 5% over the official closing price on the auction day.

 

9.1.A.11  Compulsory closing-out of company objections reported against Suspended Members and Surrendering Members

 

9.1.A.11a Suspended Members and Surrendering Members shall be allowed to replace the company objection reported against them only in the dematerialised form and not in the physical form.

 

9.1.A.11b The non-rectified/replaced shares shall be compulsorily closed out at the 19th day closing price without any mark-up.

 

The 'Suspended Members/Surrendering Members' shall be intimated by the Exchange/Clearing Corporation from time to time.

 

9.1.B         In the case of failure to give delivery in Auction Market

 

When the auction seller fails to deliver in part or full on auction pay-in day, the deal will be  closed out at the highest price prevailing in the NSE from the day on which the trade was originally executed  till the day of closing out or 20% over the official closing price on the close out day whichever is higher and will be charged to the auction seller unless otherwise specified.

 

9.1.B.1      In the case of an auction bad delivery

 

An auction delivery reported as bad delivery shall be closed out at the highest price prevailing in the NSE from the day on which the trade was originally executed till the day of closing out or 10% over the official closing price on the close out day,  whichever is higher and will be charged to the auction seller unless otherwise specified.

 

9.1.C        In case of failure to give delivery in TFTS Market Deals

 

Any shortages in TFTS Market deals shall be closed out at the relevant trade price plus 20% mark-up on the trade price.

 

9.2            Closing Out for LP Deals

 

9.2.1         In the case of failure to give delivery

 

At 20% over the actual trade price

 

9.2.2        In the case of non rectification/replacement for bad delivery

 

At 10% over the actual trade price

 

9.2.3        In the case of non rectification/replacement for objection cases

 

At 20% above the official closing price in Regular Market on the auction day.

 

9.3            In case of failure to give delivery in IL Market Deals

 

Any shortages in IL Market deals shall be closed out at the actual trade price plus 20% mark-up on the actual price.

 

9.4 In pursuance of Regulation 10.4.2 of the Capital Market Regulations, deemed closing out prices ('squaring off') are hereby specified as under :

 

9.4.1          Buy-in auction in case of short sales

 

If the value of short sales at the end of the trading period resulting in obligation to deliver, valued at the closing price plus 15%  on the last trading day in the relevant settlement, is greater than the funds pay-out available with the Clearing Corporation from the previous settlement, then the relevant authority may suo moto and without any further notice and without waiting for the CM to deliver short on the prescribed pay-in day, initiate a buy-in on the prescribed auction day immediately following the end of the trading period.

 

A CM may also request an early buy-in on its behalf by the relevant authority, provided the value of securities in question is Rs. 50 lakhs or more in the aggregate and Rs. 10 lakhs or more in any individual security.  The relevant authority may at its discretion initiate a buy-in auction for the same.

 

 


 

Item 10

 

In pursuance of Regulation 10 and 12 of Capital Market Regulation, procedures for handling intra exchange and inter exchange company objections through Bad Delivery Cell (BDC) are given below:

CONTENTS

 

10.1:    Procedure for handling Local Exchange Objections

 

10.1.1 Procedure to be followed by the Member for reporting Local Exchange Objections to the BDC of the local exchange

10.1.2   Incorrect reporting of Company Objections

10.1.3  Non Rectification of Shares or Bad delivery of rectified/replaced shares      submitted    Under  Objection.

10.1.4   Second Time Objections.

10.1.5   Corporate Benefits

 

10.2 :   Procedure for handling Inter Exchange objections

 

10.2.1  Procedure to be followed by a Member for reporting Inter Exchange objections to Bad             Delivery Cell ( in case the shares have been transacted on more than one exchange ).

10.2.2  Incorrect reporting of Company Objections

10.2.3 Non Rectification of Shares or Bad delivery of rectified/replaced shares submitted         Under Objection.

10.2.4   Second Time Objections.

10.2.5   Corporate Benefits.

 

10.3 :   General Instructions.

 

Terminology :

 

The terms used to explain the procedure for reporting objections to Bad Delivery Cell are defined below :

BDC

Bad Delivery Cell

First Introducing Exchange (FIE)

The exchange where the shares were first introduced

Local Exchange (LE)

The exchange where the shares were traded for the  last time  before they were sent for transfer to the  company.

First Introducing Member (FIM)

The member who has introduced the shares on the  First  Introducing Exchange.

Last Introducing Member (LIM)

The member who introduced the shares on the local exchange         

Receiving Member (RM)

The last member of the local exchange who has  finally received the shares before sending them for  transfer to the company.

Previous Member (PM)

The member from whom LIM purchased the shares. (i.e. the member  who has delivered the  shares to the LIM)

 

                 

 

10.1.    Procedure for handling Local Exchange Objections

 

10.1.1.             Procedure to be followed by the Member for reporting Local Exchange(LE) Objections to the BDC  (where the RM and the FIM are of the same exchange).

 

1. The shares under objection are required to be lodged by the RM of the LE with the BDC in the prescribed form BDC-1A. Claims for corporate benefits (if any) should also be made in Form BDC- 1A. RMs will be required to report such objections to the BDC on the days specified by the exchange (see schedule)

 

2. The following documents are required to be lodged:

 

· Form BDC - 1A in triplicate

· Original Transfer Deed

· Share Certificates

· Original Company Objection Memo or Certified copy of the memo.

· In case of fake / forged /stolen / missing shares, all documents as given in SEBI Good /Bad Delivery guidelines no. 108 / 109. (as per Item 5)

 

3. All the documents as given in point 2 are required to be lodged by the RM with the BDC in a sealed plastic pouch. Form BDC-1A is required to be submitted in triplicate, of which one  copy should be attached on the pouch, and the remaining two copies should be attached to the documents and placed inside the pouch.

 

4. The BDC will give an acknowledgement  to the RM on the third copy of Form BDC - 1A which is attached outside the pouch. This acknowledgement will be given by using a rubber stamp and will bear the words " subject to verification / counting ".

 

5. The BDC will retain one copy of Form BDC - 1A for its records, while the copy of Form BDC - 1A attached to the documents will be handed over to the FIM.

 

6. If all the shares (pertaining to the same company), have been introduced by the same FIM, then the RM must report this as one objection ( i.e. in one form BDC-1A). On the other hand, if the shares have been introduced in the  exchange by more than one  FIM, then the RM must report the objections separately for each FIM using a separate form BDC-1A and in separate pouches.

 

7. The BDC will allot a unique serial number (BDC Inward No.)  to each objection case reported by the RM.

 

8. The BDC will verify/count the documents enclosed by the member.  If the contents of the pouch are not in order the same will be returned to the RM of the exchange.

 

9. a. In the event that the BDC is not equipped to carry out the verification/counting the BDC will sort the documents first introducing memberwise and handover the documents to the FIM within 24 hours of receipt of such objections.

 

b. The FIM will count the securities on the counter and give an acknowledgement to the BDC for the number of securities received. The verification for the correctness of the objection will be done later.  During the process of verification, if the FIM finds that the objection is incorrect, he will return the objection to the BDC within seven days along with form BDC-3A. The BDC will give an acknowledgement on form BDC-3A to the FIM.

 

c. If the BDC is satisfied with the claim of the FIM regarding the invalidity of the objection , then the documents will be returned to the RM. If the BDC finds that the objection is valid then the FIM will be required to accept and rectify the objection.

           

10.     The BDC will sort all the objections received, in the order of FIM.

 

11. The BDC will forward the pouch containing the objections to the FIM within three days of receipt of such objections. The FIM will acknowledge the receipt of such objections by affixing his rubber stamp and initials on the copy of Form BDC - 1A retained by the exchange. The BDC will stamp the date by which the shares are to be rectified or replaced by the FIM (i.e. 21 days from the date of submitting objection to FIM). The stamp will be put on form BDC 1A in a different colour while giving acknowledgement copy to the FIM.

 

12.   The FIM will enclose the following documents while rectifying / replacing the shares      under objection.

 

· Prescribed Form BDC - 2A in triplicate

· Rectified / replaced shares

· Benefits ( if any ) due

· Copy of Form BDC - 1A

· Copy of the company objection  memo

· Cheque for value of  transfer stamps and/or corporate benefits

 

13.  The FIM will hand over the documents mentioned in point 12 above in a plastic pouch on the rectification day to the BDC. The BDC will return one copy of Form BDC - 2A to the FIM, acknowledging the receipt of rectified shares by affixing a rubber stamp bearing the words " subject to verification/counting ".  One copy of Form BDC - 2A will be retained by the BDC and the last copy of Form BDC - 2A alongwith the rectified documents will be returned to the RM.

 

14. In the event of closeout, the cheque shall be in favour of the RM who has reported this objection to the BDC for rectification.

 

15. The BDC will handover the rectified/replaced shares/ cheque and corporate benefits to the RM within seven days of the rectification day.

 

16. If the FIM fails to rectify / replace the shares under objection  by the prescribed rectification day the exchange will auction/close out the transaction as per the closeout procedure laid down in para 10.3.1.

 

10.1.2              Incorrect reporting of Company Objections

 

1. If the FIM finds that the objection /corporate benefits has been reported wrongly against him, the FIM will report such cases to the BDC by filling in form BDC - 3A and will return the shares received under objection to the BDC alongwith copy of form BDC 1A.

 

2. If no such objection has been raised by the FIM within seven days of receiving the  objection, it will be understood that the FIM has accepted the objections / corporate benefits reported against him and will be required to rectify / replace the shares by the rectification day.

 

3. The BDC will return the shares wrongly reported as objection back to  the RM.

 

4. In case of invalid claim for Corporate Benefits the FIM must submit only the form BDC - 3A duly authorised by the BDC official (Verification Officer) of the Exchange alongwith a copy of form BDC - 1A. In such cases the FIM shall retain the shares and rectify the same within the stipulated time. The BDC  will verify the validity of claim for Corporate Benefit. If the claim is found to be invalid, the BDC will forward one copy of form BDC-3A to the RM.

 

10.1.3              Non Rectification of Shares or Bad delivery of rectified/replaced shares submitted Under Objection

 

1. If the RM  finds that the shares received after rectification or replacement are not good delivery, the RM will report such cases in prescribed form BDC - 4A (in triplicate) to the BDC  alongwith a copy of Form BDC-1A and 2A within 48 hours of receipt of such shares.

 

2. If the RM finds that the benefits claimed by him are not settled then the RM will accept the rectified shares and will report only the unsettled claim to the BDC.

 

3. The BDC will verify the shares/benefits and if the shares/benefits are found to be bad delivery/unsettled then the BDC will straightaway close - out such cases (without going through auction) as per the  closeout procedures laid down para 10.3.1. The FIM will be intimated that the deal is being closed out and that his account will be debited accordingly.

 

10.1.4             Second Time Objections

 

1. In the case where same shares are rectified and if the rectified shares are again returned under objection by the company these  shares will be deemed as "Second time objections" and the shares will be straightaway closedout (without going through the auction process) as per the closeout procedure in para 10.3.1. However, in the cases where shares have been replaced or procured under auction and these shares again come under objection,  these shares will not be considered as second time objections and  will be treated as fresh objections and dealt with accordingly. 

 

2. The RM will report the shares under second time objection to the BDC in the form for second time objections. Form  for  Second Time Objections  will be the same format as BDC - 1A/1B but will be of a different colour (pink colour) and have the words " SECOND TIME OBJECTION "  written in bold on the top of  the form. 

 

3. The following documents are required for reporting second  time objections.

 

· Fresh copy of form for  Second Time objections ( in triplicate)

· Transfer deed and share certificates returned by the company

· Company objection memo

· A copy of Form BDC - 1A and 2A which have been used for reporting the first time objection.

 

4. The documents mentioned in point three above are required to be submitted in a plastic pouch.

 

5. All the Second Time objections will be straightaway closed out without going through the auction process. (see close out procedures in para 10.3.1)

 

10.1.5              Corporate Benefits

 

(The procedure for handling corporate benefits for local exchange shall be as per clause 10A.11 of item 10A)

 

1. Members are required to claim corporate benefits while submitting the bad delivery to BDC in form BDC - 1A. Once the claim for benefits has been made by a member,  the member cannot refuse to accept the corporate benefits.

 

2. If the market rate of the corporate benefit is less than the cost of procurement of the benefit then such benefit may not be taken up for settlement. 

 

3. If the member is not in a position to submit the corporate benefit in the form of shares then he should submit a cheque as per the valuation given in Annexure-10.1 alongwith form BDC - 2A. 

 

4. Rectified/replaced shares shall be accepted by the BDC only if they are accompanied with the corporate benefits ( either in the form of shares or equivalent value in the form of cheque in favour of the receiving member) claimed as per form BDC-1A.

 

10.2                 Procedure for handling Inter Exchange objections.

 

10.2.1             Procedure to be followed by a Member for reporting Inter Exchange objections to BDC ( in case the shares have been transacted on more than one exchange )

 

The procedure has been splited into two parts :

 

In Part 1 the RM will approach BDC of LE and submit his objections using form BDC-1A ,which will have to be rectified by the LIM as per the procedures laid down for handling local exchange objections.

 

In the Second Part ,LIM may opt for any of the following two options :

 

Option 1 : In case of Inter Exchange objections the LIM may handover the documents under objection to the PM (who has delivered the shares to him) directly without going through the  BDC. 

 

Option 2 : LIM can approach the BDC of the LE for rectification / replacement of the shares under company objection. In that case the BDC of LE will forward the shares to the BDC of the FIE who will in turn forward the same to the FIM. The detailed procedure in case of Option 2 will be as under :

 

1. The shares under objection are required to be lodged by the LIM with the BDC of the LE in the prescribed Form BDC - 1B in quadruplet. Claims for corporate benefits (if any) should also be made in Form BDC- 1B.

                                                                                                                                 

2. The following documents are required to be enclosed.

 

· Form BDC - 1B (in quadruplet)

· Original Transfer Deed

· Share Certificate

· Company Objection Memo or Certified copy of the memo.

 

· In case of fake / forged /stolen / missing shares, all documents as given in SEBI Good /Bad Delivery guidelines no. 108 / 109.( as per Item 5)

 

3. Two sets of photo copies of the documents mentioned in point 2 above are  required to be submitted at the time of reporting of objection. One copy of the this set will be retained by the BDC of LE. The second set along with the original documents will be forwarded to BDC of  FIE.

 

4. All  above documents are required to be lodged with the BDC of LE in a sealed plastic pouch. The original documents along with one set of photocopies should be enclosed in one pouch, while the second set of photocopies should be enclosed in a separate pouch. An additional copy (fourth copy ) of Form BDC - 1B will be attached outside the pouch containing the second set of photocopies.

 

5. The BDC of LE will give a subject to verification/counting acknowledgement to the  LIM on the fourth copy of Form BDC - 1B by affixing a rubber stamp.

 

6. The  BDC of the LE will retain the pouch containing one set of photocopies for its records, while the pouch containing the original documents and one set of photocopies will be forwarded to the BDC of the FIE after verification of the objections.

7. The members are required to report objections pertaining to shares of different  companies/different FIMs separately. (i.e. each pouch shall contain one objection pertaining to one company and one introducing member).

 

8. The BDC of LE will affix a unique serial number called the BDC inward number on Form BDC-1B. The BDC inward no. will be an eight digit reference serial no. The first two digits will be the exchange code of the LE followed by a six digit serial number. All future communications pertaining to an objection should be done by using the BDC Inward No. as the reference number.

 

9. The BDC of LE will verify/count the documents enclosed by the member.  If the contents of the pouch are not in order the same will be returned to the LIM.

 

10. The BDC of the LE will sort all the objections received, in the order of the first introducing exchange. All objections pertaining to the FIE will be sent in one parcel to the FIE alongwith a list of all objections enclosed.

 

11. The BDC of the LE will forward the pouch containing the objections (along with original transfer deed, share certificate, company objection memo, other documents and one set of photocopies of all the documents ) to the BDC of the FIE within seven days of receipt of such objections.

 

12. The BDC of the FIE will verify / count the contents of the pouch received from the BDC of the LE before handing over the same to the  FIM.

 

13. The BDC of FIE will hand over the objection to the FIM on the day specified by the exchange (as per the objection schedule followed by the exchange). The BDC of the FIE will retain the second set of photocopies for its reference after obtaining an acknowledgement on the copy of Form BDC - 1B from the  FIM. The FIM is required to rectify/ replace  the shares within 21 days of receipt of shares under objection. If the FIM fails to rectify/ replace the shares within 21 days, the first exchange will auction/close-out the shares as per the procedure laid down in para 10.3.1.

 

14. The  FIM will enclose the following documents while rectifying / replacing the shares under objection.

 

· Prescribed Form BDC - 2B ( four copies )

· Rectified / replaced shares

· Benefits ( if any ) due

· Copy of Form BDC - 1B

· Copy of the company objection  memo

· Demand draft for value of  transfer stamps or benefits

 

15. The  FIM will hand over the documents mentioned in point 15 above in a plastic pouch on the rectification day to the BDC of the FIE. The BDC of the FIE will  return one copy of Form BDC - 2B to the FIM after giving a subject to verification/counting acknowledgement by affixing a rubber stamp on Form BDC - 2B. One copy of Form BDC - 2B will be retained by the BDC of FIE and the rectified documents alongwith third and fourth copies of Form BDC - 2B  will be returned to the BDC of the LE.

 

16. BDC of FIE will verify all the documents and return the rectified/replaced shares/ demand draft/pay order and corporate benefits back to  BDC of LE within seven days of rectification/replacement.

 

17. BDC of LE will hand over the rectified/replaced shares/demand draft for transfer stamps / close-out amount  and corporate benefits back to LIM after verification.

 

18. The LIM will duly acknowledge the rectified shares received by affixing the rubber stamp on the copy of Form BDC - 2B retained by BDC  of last  exchange.

 

19. The demand draft/pay order  shall be in favour of the LIM.

 

20. In case of close-out by the exchange , the BDC of the FIE will have to collect the demand draft/pay order from the  FIM, in favour of the  LIM and forward the same to the BDC of the LE.

 

10.2.2              Incorrect reporting of Company Objections

 

1. If the FIM finds that the objection has been wrongly reported, the member should report the invalid objection by submitting form BDC-3B in quadruplet along with a copy of form BDC - 1B and the shares received to BDC of FIE. This should be done within a period of seven days from the date of receipt of such objections, failing which it will be understood that the FIM has accepted the objections / corporate benefits reported against him and will be required to rectify / replace the shares by the rectification day or else the exchange will auction/close-out the shares as per  the close out procedure in para 10.3.1.

 

2. In case of invalid claim for Corporate Benefits the FIM must report such cases to the BDC of the FIE by submitting form BDC - 3B in quadruplet alongwith a copy of form BDC - 1B within seven days of receipt of the claims .  In such cases the FIM shall retain the shares and rectify the same within the stipulated time. The BDC  of the FIE will verify whether the claim for Corporate Benefit is invalid, before forwarding the forms BDC - 3B and BDC-1B only to the BDC of the LE.

 

3. BDC of FIE will verify the validity of the objections raised by the FIM and return the shares back to BDC of LE who in turn will verify the objections received and will hand over the shares to the LIM alongwith a copy of the form BDC - 3B and BDC-1B.

 

10.2.3              Non Rectification of Shares or Bad delivery of rectified/replaced shares submitted Under Objection.

 

1. If the LIM finds that the shares received by way of rectification or replacement are not good delivery, the LIM will report such cases in the form BDC-4B (in quadruplet) to the BDC of the local exchange alongwith a copy of Form BDC - 1B and 2B within 48 hours of receipt of such shares.

 

2. If the LIM finds that the benefits claimed are not correctly settled then the  LIM will accept the rectified shares and will report only the unsettled benefits to  BDC of the LE.

 

3. The BDC of the LE will verify these shares/benefits  and if the shares/benefits are found to be bad delivery/unsettled then the BDC of the LE will report such cases to the BDC of the FIE within a period of seven days from reporting of such cases. The BDC of the FIE will verify the claims and in case of valid claims, will straightaway close-out such cases (without going through the auction process) as per close out procedures in para 10.3.1. The FIM will be intimated that the deal is being closed out and that his account will be debited accordingly.

 

10.2.4              Second Time Objections.

 

1. In the case where same shares are rectified and if the rectified shares are again returned under objection by the company these  shares will be deemed as "Second time objections" and the shares will be straightaway closedout (without going through the auction process) as per the closeout procedure in para

10.3.1. However, in the cases where shares have been replaced or procured under auction and these shares again come under objection,  these shares will not be considered as second time objections and  will be treated as fresh objections and dealt with accordingly.

 

2. The LIM will report the shares under second time objection to the BDC of the LE in the form for Second Time objections. The form for such objections will be of the same format as that of Form BDC - 1B but the form will be of a different colour (pink colour) and the words " Second time objection " will be written in bold on the top of the form.  

 

3. The following documents are required for reporting second  time objections.

 

· Transfer deed and share certificates returned by the company

· Company objection memo

· Second Time Objection form ( in quadruplet)

· A copy of Form BDC - 1B and 2B which have been used for reporting the first time objection.

 

4. The documents mentioned in point three above are required to be submitted in a plastic pouch.

 

5. The BDC of the LE will forward the shares under second time company objections to the BDC of the FIE. The BDC of the FIE will, on receipt of second time company objections, straightaway close-out such shares (without going through the auction process) as per the close out procedures in para 10.3.1 and forward the demand draft/closeout for the close-out amount to the BDC of the LE who will in turn forward the same to the LIM.

 

10.2.5              Corporate Benefits

 

1. Members are required to claim corporate benefits while submitting the bad delivery in form BDC - 1B. Once the claim for benefits has been made by a member, the member cannot refuse to accept the corporate benefits.

 

2. If the market rate of the corporate benefit is less than the cost of procurement of the benefit then such benefit may not be taken up for settlement. 

 

3. If the member is not in a position to submit the corporate benefit in the form of shares then he should submit a demand draft as per the valuation given in Annexure - 10.1 alongwith form BDC - 2B. 

 

4. Rectified/replaced shares shall be accepted by the BDC of the FIE only if they are accompanied with the corporate benefits ( either in the form of shares or equivalent value in the form of demand draft/pay order in favour of the LIM) claimed as per form BDC-1B.

 

10.3                 General Instructions

 

1.  The exchange should arrange for well equipped and trained manpower to carry out the activities of the BDC, further it should have a verification officer who will decide the validity of  objections.  Since the quality of decision is critical, the verification officer  should be a senior qualified person.

 

2. The plastic pouches to be used for reporting objections should be of good quality and transparent so that the contents can be  viewed from outside.

 

3. The BDC forms should be placed on top of all documents inside the pouch so that the details on the form are clearly visible from outside the pouch.

 

4. Members/ stock exchanges should strictly adhere to the formats of the  BDC forms.

 

5. In case the BDC of the last Exchange does not receive the rectified/replaced shares or the close-out amount within the specified time frame, such cases should be referred to the Inter Exchange Arbitration Panel.

 

6. The Exchange should maintain a register  which would contain the details (as per Annexure  B1 and B2) pertaining to all objections reported to the BDC. Separate register should be maintained for local and inter exchange objections.

 

7. The Exchange should forward to SEBI monthly status reports giving details on the objections received, objections resolved, objections referred for arbitration, value of objections, reasons for objections, list of companies and Registrar and Transfer agents related to the objections reported. The above details may be incorporated into the Register.

 

8. Stock exchanges should get into a contract with a reliable courier agency for couriering objection documents from one BDC to the other.

 

9. Stock exchanges are also required to arrange for adequate insurance covers for the documents which might be reported as lost in transit.

 

10. In cases where odd lot shares reported as objection are not rectified, such cases will be closed as per close out procedures.

 

11. In case the shares reported as objection fall in the no delivery period, then such shares will not be rectified within 21 days but will become due for rectification only on expiry of the no delivery period.

 

12. The members delivering the rectified shares should ensure that the shares are good delivery  as per the Good/Bad delivery guidelines issued by SEBI. The rectified shares should have a new transfer deed so that the party receiving the rectified shares can sell the rectified shares in the market if he so desires, and not necessarily send the shares for transfer back to the company.

 

13. BDC will verify the validity of all objections being sent for rectification or being received after rectification  in case of inter exchange objections.

 

14. In case shares are lodged after Book Closure or Record Date and such shares are returned under company objection then such objections can be reported to the BDC but no claim can be made for Corporate Benefits accruing from such shares. Claim of corporate benefits will be considered only as request matter.

 

15. In case it is not possible to attach the original objection memo, a copy of the memo duly certified by the receiving member should be used.

 

16. In case where the FIM is the member of an exchange who has put first stamp on the transfer deed, and he has entered into a trade through a member of another exchange (meaning that the FIM has a relationship of client to the second introducing member), in such cases the objection should be reported against the second member and not against the FIM.

 

17. In case of defaulters, 25 % of the total proceeds recovered from the defaulter should be kept aside for a period of three years from the date of declaring him a defaulter to meet any future liability arising on account of bad delivery of shares introduced by defaulting member.

 

18. Members may note that the relevant Objection code (as detailed below) should be stated on BDC-1A, at the time of reporting company objections.

 

Objection Code                        Objection Reason

01                                SIGNATURE MISMATCH

02                                OUT-DATED TRANSFER DEED

03                                FAKE/FORGED/STOLEN/MISSING SHARES

04                                ATTACHED BY INCOME TAX

05                                RBI APPROVAL REQUIRED

06                                ALTERATIONS ON TRANSFER DEED BY IM

07                                STOP TRANSFER SHARES

08                                OTHERS

 

Members are requested to ensure that the correct objection code is stated on the BDC-1A form.

 

19. Members may also note that for objections reported with reason code '03', no rectification/replacement/ in physical form shall be allowed. However such objection may be replaced by the introducing member, in demat form.

 

10.3.1.             Auction / Close Out procedures (Auction/Close Out Procedures given below shall  be subject to the  relevant  provisions given in item 11)

 

1.  Local Exchange :

 

AUCTION : In case the FIM fails to rectify/replace the shares within 21 days , the exchange will put up the unrectified/unreplaced shares in the immediate auction.  The FIM will be debited with the auction amount and the shares procured in the auction will be handed over by the BDC to the RM. The amount equivalent to the stamp duty and benefits/claims (if any) will also be debited to the FIM's account and will be paid to the RM by BDC directly.

 

CLOSEOUT : In case, the shares are not available in the auction conducted, the shares would be closed out  at 20% over the official closing price on the exchange on the day on which auction offers are called for ( and in the event of there being no such closing price on that day, then the official closing price on the immediately preceding day on which there was an official closing price) will be taken.

 

The FIM will be required to forward a cheque equivalent to the close-out amount, stamp duty and the benefits claimed amount ( if any) to the BDC in favour of the RM.

 

2.  Inter Exchange :

 

AUCTION : In case the FIM fails to rectify/replace the shares within 21 days, the FIE will put up the unrectified/unreplaced shares in the immediate auction.  The FIM will be debited with the auction amount and the shares procured in the auction will be handed over by the BDC of the FIE to the BDC of the LE who will in turn hand over the same to the LIM. The amount equivalent to the stamp duty and benefits/claims (if any) will also be debited to the FIM's account.

 

CLOSEOUT : In case, the shares are not available in the auction conducted, the shares would be closed out at 20% over the official closing price on the exchange on the day on which auction offers are called for ( and in the event of there being no such closing price on that day, then the official closing price on the immediately preceding day on which there was an official closing price) will be taken.

 

The FIM is required to forward a demand draft/pay order equivalent to the close-out amount, stamp duty and the benefits claim amount ( if any) to the BDC of the FIE in favour of the LIM.

 

In case the FIM fails to forward the demand draft to the BDC, the exchange will initiate action against the member as per rules and regulations of the exchange.

 

10.3.2              Auction/Close-Out procedures in case of fake/forged/stolen securities reported under company objection

 

All cases of company objections pertaining to fake/forged/stolen securities reported against the introducing member shall be closed-out by the Clearing Corporation subject to the relevant provisions given in item 11.

 

10.3.3              Fee Structure for processing objections through the Bad Delivery Cell

 

The exchange will collect from the FIM/LIM a service charge for processing objections through the BDC. Such service charges may be collected through pre-paid coupons attached to the objection or through computerised billing. The service charge will be payable per objection submitted for the member. The charges should enable the BDC  to develop their own reserve of recyclable funds over a period of time.

 

10.3.4              Instructions for filling of BDC forms

 

1.Since the processing of objections will involve stock exchanges form various parts of the country, it is suggested that the BDC forms should be filled in English  which is accepted by all the Stock Exchanges  as the common business language.

 

2.The BDC inward no. will be an eight digit number. The first two digits will the exchange code of the last exchange followed by a six digit unique serial number.

 

3.The BDC inward no. assigned to an objection should be used as a reference number by all the BDC's for all future communications related to that particular objection.

 

4.Members are required to use the relevant objection codes based on the reason for objection as given on the reverse of the form.

 

10.3.5              Introducing Member being declared a defaulter

 

Local Exchange :

 

In case the FIM has been declared defaulter, the RM has to file a claim with the Defaulter's Committee/Clearing Corporation for resolving the claim for company objection.

 

Inter Exchange :

 

In case the FIM has been declared defaulter, the RM will report the objection for rectification to the LIM. The LIM will rectify/replace the objection and submit the same to the BDC of  LE within 21 days as is the normal practice.

 

The LIM will in turn report the objection for rectification to the BDC of the LE. The BDC of the LE will forward the documents under objection to the BDC of the FIE. The BDC of the FIE will forward the documents to the last member of the FIE for rectification within 21 days. The last member of the first exchange will then file a claim with the Defaulter's Committee/Clearing Corporation of the first exchange for resolving the company objection. 

 

In case LIM has been declared defaulter, the FIM will continue to be responsible for rectification of bad deliveries.

 

10.3.6             Partial rectification of company objection

 

In case introducing members are not able to rectify the complete lot of objections reported, they will be allowed to submit rectified objections in part provided the rectified quantity is in a market  lot.

 

In case an odd lot is reported as an objection, the introducing member is required to rectify/replace either the entire odd lot or in case of partial rectification, the member is required to rectify in a market lot.

 

The introducing member will settle the benefit claimed in proportion to the quantity of shares rectified/replaced by the member.

 

10.3.7.1                      Benefit Claims

 

 Claims for benefits can be made in the following cases:

 

a.  where the book closure/record date (BC/RD) for the corporate benefit claimed has passed  before the reporting day, or

 

b.  where BC/RD for the corporate benefit claimed falls after the reporting day but before the  rectification pay-out day, or

 

c. where the BC/RD for the corporate benefit claimed falls after the rectification pay-out day  but within 15 days from rectification pay-out day.

 

 Illustration:

Sr. No. Reporting Day  Rectification Pay-out Day         Book Closure/ Record Date    Remarks

a.         11/3/96                                    1/4/96                          1/3/96              Benefits can be claimed

b.         11/3/96                                    1/4/96                          20/3/96                        Benefits can be claimed

c.         11/3/96                                    1/4/96                          15/4/96                        Benefits can be claimed

d.         11/3/96                                    1/4/96              16/4/96 and later           Benefits cannot  be claimed

 

10.3.8                  Stamp Duty

 

In case objection quantity is replaced or in case of auction/close out, the receiving member is entitled to claim the stamp duty already paid by him on the original document. The introducing member will be required to pay the stamp duty amount based on the official closing price on the last rectification day or original stamp duty paid by the receiving member, which ever is higher. The amount of stamp duty paid will have to be specified on the BDC form by the receiving member at the time of reporting of objections. In case objection quantity is rectified, the introducing member will be required to pay the difference amount of, stamp duty based on the official closing price on the last rectification day over the original stamp duty paid by the receiving member. In case objection quantity is replaced in demat by the introducing member, the introducing member will not be required to pay the stamp duty to the receiving member.

 

 

10.3.9              Schedule for Reporting / Rectified Company Objection.

 

A typical schedule for reporting and rectification of objection is given below. The exchanges may design their own schedule using the typical schedule.

 

Reporting of Objections and Claiming Corporate Benefits                      Wednesday     

 

Date of Intimation to the LIM/FIM                                            Friday                    Day 1

 

Pick up of Objections by the LIM/FIM                                     Saturday          

 

Reporting Invalid  Objections and Corporate Benefit Claims 

(if any) by the LIM/FIM                                                                       Thursday                Day  7

 

Rectification/Replacement of Objections along with corporate

benefits by the LIM/FIM                                                                       Thursday/ Friday     Day 21

 

Rectified Objection Pay-Out to the RM                                                Monday          

 

Reporting non rectified objections or objection bad

delivery by the RM                                                                   Wednesday     

 

10.3.10            Reporting of Objections by custodians to the BDC

 

Custodians who have received the delivery of securities through the clearing house are entitled to report such objections for rectification directly to the BDC of the exchange without collecting any collateral for such shares. In the alternative, if the custodians do not wish to report objections for securities received through the clearing house to the BDC, they could handover the securities for rectification to the members through whom the shares were purchased, in compliance with the guidelines issued to them from time to time in this regard.

 

10.3.11            Resolution of disputes arising between BDC's of two exchanges

 

SEBI will constitute an Inter-Exchange Arbitration Panel for settlement of disputes arising between BDC's of two exchanges. The detailed working of the panel will be intimated  to the stock exchanges in due course.

 


 

Item 10A

 

In pursuance of Regulation 12 of the Capital Market Regulation, procedures for rectification/replacement of defective documents in addition to those mentioned in item 10 are hereby specified as under :

 

10A.1              Market / Odd lot cases

 

The receiving member may either report (i) full market lot as under objection or (ii) report the odd lot portion alone as under objection.

 

Where the member reports the full market lot the introducing member will be required to replace / rectify the full quantity.

 

10A.2              Receiving Member Entitled to Benefits

 

The receiving member is entitled to receive from the introducing member all the corporate benefits declared by the company during the period reckoned from the first day of the settlement period in which he received the document in delivery till the day of receipt of objection rectified delivery from the Introducing member.

 

10A.3                          Procedure for reporting Company Objections

 

1. Each objection for rectification is required to be submitted by the Receiving member (RM) in a plastic pouch .

 

2. Objections are required to be submitted in Form BDC - 1A as per the format prescribed by the Exchange, on a paper of uniform (A4) size.

 

3.  The security symbol and series (except in cases where the call money has been paid) should be the same as that appearing on the delivery slip received by the RM. The RM should ensure that they are reporting the objection against the correct Introducing Member (IM).

 

4.  Form BDC - 1A is required to be submitted in triplicate, of which two copies should be firmly attached on the pouch, and the third copy should be attached to the lot under objection and placed inside the pouch.

 

5.  A copy of the delivery slip, delivery detail statement must be attached along with the second copy of Form BDC - 1A attached on the pouch. In the event of a member not being in a position to attach the delivery slips and delivery details statement, the member is required to submit an undertaking to the Clearing Corporation (per each objection inward no.) in the format enclosed (Annexure - 10A). The above undertaking is to be given only in case of fake/forged/stolen shares reported under objection and where the introducing member at the Exchange/Clearing Corporation is other than a defaulter/surrendering/ surrendered/suspended/disabled member to be informed by the Exchange/Clearing Corporation from time to time.

 

6.  Form BDC-1A should be complete in all respects. Incomplete forms are liable to be rejected.

 

7.  Where the number of shares reported as a single objection are large, the distinctive number ranges (DNRs) must be written on the reverse of Form BDC - 1A or on a separate paper, which bears the stamp of the RM reporting the objection. Members are required to ensure that  the total number of shares reported as objection is clearly mentioned on the first page of each copy of Form BDC - 1A.

 

8.  If all the shares comprising a particular delivery have been introduced by the same Introducing Member ( IM), then the Receiving Member (RM) must report this as one objection. On the other hand, if the shares comprising the delivery have been introduced by more than one IM, then the RM must report the objections separately for each IM, as illustrated below :

 

Illustration I

           

     SCRIP  QTY OBJ.  DEL NO.  DEL MEM.NO.  INTRO. MEM.(IM)   REPORTING REC.MEM.

A   TISCO   500, 500    411,411    6511,6511         4563, 4563               6077,6077

B   ACC      800, 200    1002,1002  8526,8526            6123,4724           6077,6077

 

In "A" above, the Receiving Member should report one objection case comprised of 1000 TISCO against IM No. 4563.

In "B" above, the  Receiving Member should report two cases of objection. One case of 800 ACC against IM No. 6123.  The other case of 200 should be reported against IM No.4724.

 

9. Members are required to attach Inward no. stickers for Company Objections which will be printed at the Clearing House.  The Inward no. stickers are required to be affixed on all the three copies of form BDC - 1A.

 

10. In cases where the seller delivers the shares in market lots but the receiving member lodges the shares for transfer with a jumbo transfer deed and the receiving member is not in a position to return all the original transfer deeds submitted with each market lot whilst reporting company objection, the receiving member is required to give an undertaking indemnifying the introducing member in the event of the said original transfer deed(s) being misused at any future date in the prescribed form 6J

 

11. In case where the First Introducing Member (FIM) is an NSE member and the objection has been lodged on him by the RM, however the objection has been withdrawn by the FIM on ground of insufficient details, the RM then has an opportunity to relodge the objection on the FIM after procuring the relevant documents, within 1 (one) year from the date of first lodging the objection on the FIM.

 

10A.4  Procedure for Rectified Company Objections

 

1. IM's are required to submit rectified / replaced objections along with benefits  (if any) in plastic pouches.

 

2. IM's are required to ensure that the Inward no. on Form BDC - 1A is the same as the Inward no. on both the delivery slip and the delivery detail statement.

 

3. The rectified / replaced objections are required to be submitted along with the following documents :

 

a. Delivery Slip, Delivery detail statement each in duplicate.

 

b. Form BDC 2A,  if benefits are attached ( in triplicate ).

 

c. Form BDC - 1A, along with the rectified / replaced shares.

 

d. Company Memo.

 

4. One copy of the delivery slip, delivery detail statement, Form BDC 2A is required to be attached on the pouch while the second copy of delivery slip, delivery detail statement, Form BDC 2A and Form BDC - 1A along with rectified / replaced shares,  company memo are required to be placed inside the pouch .

 

5. The rectified/replaced  company objection shares and the benefits due i.e. shares (if any), are required to be enclosed in the same pouch. The lot should be so placed in the pouch that the delivery slip, delivery details statement, are clearly visible, without having to open the pouch.

 

6. In case objections are rectified in part, it is required by the IM to follow the same procedures as mentioned in para B1-B4 above. Partly rectified objections are required to  be submitted in a single instalment.

 

7. The rectified /replaced lots should be arranged in the same order as they appear on the Final Delivery Statements (FDS).

 

8. Where the shares are replaced, the word " REPLACED " must be written in bold on all copies of the delivery slip & delivery detail statement. If rectified, the words " RECTIFIED" must be written on all copies of the delivery slip & delivery detail statement. If a lot is partly rectified and partly replaced, then the delivery slips (clearing house and RM copies) should be marked as illustrated below :

 

Illustration  II

 

Objection 500 shares of this, 300 are replaced and 200 rectified.

 

The delivery slips is required to be marked as under :

 

                        "200 RECTIFIED + 300 REPLACED"

 

9. For rectified shares, if the IM furnishes a new TD, the old transfer deed bearing the transfer stamps and a copy of company objection memo are required to be attached to the lot . If old transfer deeds are not attached, then value of transfer stamps will be debited to the IM.

 

10. Receiving Members are required to verify and count the rectified/replaced shares to ensure the correctness of quantity received by them, before leaving the Clearing House.   

 

 

 

10A.5             Procedure for reporting Unrectified Company Objections

 

1. Unrectified company objections are required to be reported  in Form 6E.

 

10A.6             Procedure for Reporting Second Time Company Objections

 

1. Members are required to fill up a fresh Form BDC - 1A ( in triplicate ) for reporting Second time objections and follow the same procedure as outlined in para A1-A4.

 

2. Members are required to take fresh Inward no. stickers for second time objections.

 

3. "Second Time Company Objection" must be written in bold on each copy of Form BDC - 1A.

 

4. The share certificates, transfer deeds, company objection memo for second time objection, in addition to original Form BDC-1A and delivery details statement pertaining to first time objection are required to be submitted for reporting second time objection.

 

10A.6.2           Procedure for reporting second time company objections wherein the old   transfer deed for first time objection is not present

 

Where securities which are lodged by receiving member as company objections for reason of signature difference, are returned to the receiving member after rectification, and such rectified securities are again lodged by the receiving member as company objection for the reason of the securities being stolen securities, then in such case, the receiving member is required to report the objection against the delivering member from whom the securities were originally received alongwith documents as required under Item 10A. The delivering member would then be required to withdraw the objection as detailed in Item 10A.8 alongwith details of the member from whom they had received the securities and additionally enclose copy of the delivery slip and delivery details statement.

 

In the event of the delivering member being unable to provide the delivery slip and delivery details statement as proof of having received the shares on the Exchange, such delivering member shall be treated as the introducing member for such documents, and the objection shall be processed accordingly.

 

10A.7             Procedure for reporting partly paid shares traded as fully paid up.

Securities which were traded as partly paid are required to be reported under objection with symbol/series of the new security. The receiving member (RM) is required to submit necessary documents as proof of having paid the allotment money/call money as may have become due and payable at the time of reporting the objection.  In case where the allotment/ additional call money has not been paid, the RM shall be required to enclose a demand draft (payable at Mumbai) equivalent to the allotment/call money amount in favour of the introducing member (IM), alongwith the company objection lodged against the IM with the Clearing House. The IM shall then be required to rectify/replace the shares within the prescribed time of 21 days, failing which, auction/close-out procedures as per the provisions of item 9 and item 11 of this circular.

 

 

 

 

10A.8             Procedure for Handling Withdrawal of Company Objections.

1. Request for withdrawal of company objection/corporate benefits is required to be made in the  prescribed Form BDC 3A along with a copy of Form BDC - 1A.

 

2. Withdrawals are required to be reported for the entire quantity under objection within seven days of scheduled pick up of company objection for rectification.

 

3. In case of objections which have been withdrawn, the IM is required to submit  the acknowledgement copy of the withdrawn objection (Form BDC 3A) on the due date for rectification ( 21st day ) to the Clearing Corporation.  Failure on the part of the IM to report these cases by the due date may lead to auction of the securities against the IM. 

 

4. The IM should mention all the reasons for withdrawal in respect of the company objection reported at the first instance itself.  All subsequent request for withdrawal of company objection  for reasons not mentioned at the time of  first withdrawal, in respect of the said case may not be accepted by the Clearing Corporation.

 

10A.9             Procedure for reporting Fake/Forged/Missing/Stolen shares

 

1. The following documents are required to be lodged in triplicate in separate pouches:

 

· Form BDC - 1A bearing rubber stamp - 'FAKE/FORGED/STOLEN' in bold.

· Delivery Slips and Delivery Details Statement of receipt of shares by the RM.

· Original transfer deed (photocopy where original retained by the company/share transfer agent ).

· Share Certificates (photocopy where original retained by the company/share transfer agent).

· Original Company Objection Memo or Certified copy of the memo.

· In case of fake/forged/stolen/misplaced shares, all documents as given in SEBI Good/Bad Delivery

  guidelines no. 108/109 (as per item 5 )

 

2 Members are required to affix rubber stamp bearing words 'FAKE/FORGED/STOLEN' on top right hand portion of form (BDC-1A) for reporting fake/forged/stolen/misplaced shares under company objection.

 

3 In addition, two copies of Form BDC - 1A are required to be attached on the pouch which contains the original documents.

 

10A.10            Procedure for reporting company objections against Defaulters/Suspended/ Surrendering/Expelled members

 

1. Where the FIM has been declared a defaulter or is an expelled member, the RM has to lodge the claim / objection within six months from the date of the objection memo or six months from the date the member is declared a defaulter /expelled from the Exchange, whichever is later.

 

2. The following documents are required to be lodged :

 

· Form BDC - 1A bearing rubber stamp - 'DEFAULTER/ SUSPENDED MEMBER/ SURRENDERING  MEMBER/ EXPELLED MEMBER' in bold 

· Delivery Slips and Delivery Details Statement of receipt of shares by the RM

· Original transfer deed (photocopy where original retained by the company/share transfer agent).

· Share Certificates (photocopy where original retained by the company/share transfer agent ).

· Original Company Objection Memo or Certified copy of the memo.

· In case of fake/forged/stolen/misplaced shares, all documents as given in SEBI Good/Bad Delivery  guidelines no. 108/109 (as per item 5 )

· 4 sets of all above documents in case of fake/forged/stolen/misplaced shares and in triplicate for all other  cases of company objections in separate pouches.

 

3. Members are required to affix rubber stamp bearing words 'DEFAULTER/SUSPENDED MEMBER/ SURRENDERING MEMBER/ EXPELLED  MEMBER' on top right hand portion of form (BDC-1A) for reporting company objections against defaulters/suspended members/surrendering members/expelled members.

 

4. In addition, two copies of Form BDC - 1A are required to be attached on the pouch which contains the original documents.

 

5. (i) For company objections to be reported against defaulters/ suspended members/ expelled members, the receiving member is required to report the same against the clearing member whose pay-in stamp appears subsequent to the defaulter/ suspended member/ expelled member on the transfer deed attached to the shares under objection.

 

(ii) The subsequent member may withdraw the compay objection by providing the delivery slips and delivery details statement of receipt of these shares from the defaulter/suspended member/expelled member through the Clearing House.

 

(iii) If the subsequent member withdraws the company objection by providing the required delivery slips and delivery details statement of receipt of these shares from the defaulter/suspended member/expelled member through the Clearing House, then the receiving member is required to report the company objection against the defaulter/suspended member/expelled member along with the delivery slips and delivery details statement received from the subsequent member as per point 4 (ii) mentioned above and the documents specified in point 1 mentioned above.

 

(iv) However, where the receiving member reporting the company objection, had received these shares directly from the defaulter/suspended member/expelled member through the Clearing House, then the receiving member can report the company objection against the defaulter/suspended member alongwith the copies of delivery slips and delivery details statement of receipt of these shares from such defaulter/suspended member/expelled member and the documents specified in point 1 mentioned above.

 

(v)  In case of company objections reported against Introducing Members, which are pending close out by the Clearing Corporation, shall be withdrawn by the Clearing Corporation, when such members are subsequently declared defaulter/suspended/expelled members. The Receiving Members shall then be required to report the same against the member whose pay-in stamp appears subsequent to such defaulter/suspended member/ expelled member, on the reverse of the transfer deed. The subsequent member may withdraw the objection as per item 10A.10 (5) by giving copy of the delivery details statement proving that the shares have been received from the defaulter/suspended member/ expelled member through the Clearing Corporation. Thereafter, the receiving member would be required to lodge the objection against the defaulter/suspended member/ expelled member, enclosing the delivery details statement, within 1 month of withdrawal of objection by the relevant subsequent member.

 

Such re-reported objections against defaulter/suspended member/ expelled members shall not be withdrawn for the reason of "objection memo outdated", provided documents establishing that the objection has been originally lodged against the defaulter/suspended member/ expelled members, within the stipulated time, with valid documents, are provided.

 

6. Upon the public notification of the surrender of the trading membership and within eight (8) months from the date of such notification, all trading members/clearing members shall report company objections, if any, against such surrendering trading members to the Clearing Corporation.

 

10A.11            Procedure for handling Corporate Benefits

1. Members are required to claim corporate benefits while submitting their shares for company objections in the revised form BDC - 1A in triplicate.  Once a claim for benefits has been made by a receiving member, the receiving member cannot refuse to accept the corporate benefits.( eg. Claim for right shares etc. )

 

2. All details related to benefits claimed must be correctly filled up on Form BDC - 1A failing which the benefits claimed may not be settled.  All incomplete forms are liable to be rejected.

 

a. In case of claims for bonus/rights shares, the quantity claimed, ratio of benefits, rights issue price, book closure/record date, security symbol are required to be filled up on Form BDC - 1A.

b. In case of dividend claims, details of dividend rate, financial year, type of dividend (whether interim or final), quantity, book closure/record date, are required to be filled up on Form BDC - 1A.

 

3. In case of multiple benefits being claimed against the same objection, members must ensure that each benefit is stated separately on Form BDC - 1A.  Where the value of two or more benefits (for the same objection) have been claimed, then each benefit must be stated separately on the same Form BDC - 1A.

 

Illustration I

 

Dividend due on 200 shares of ABC Ltd.

a. Interim - for 1992-93 @ Rs.2/- per share = Rs.400/-.

b. Final - for 1992-93 (excluding interim dividend) @ Rs.3/- per share = Rs.600/-.

 

                        In the above case, each amount should be stated separately.

4. Claims for benefits can be made in the following cases:

 

a. where the book closure/record date (BC/RD) for the corporate benefit claimed has passed before the reporting day, or

b. where BC/RD for the corporate benefit claimed falls after the reporting day but before the rectification pay-out day, or

c. where the BC/RD for the corporate benefit claimed falls after the rectification pay-out day but within 15 days from rectification pay-out day.

 

Illustration II

 

Sr.No  Reporting Day           Rectification   Book Closure             Remarks

                                                Pay-out Day   Record Date  

a.         11/3/96                        1/4/96              1/3/96                          Benefits can be claimed

b.         11/3/96                        1/4/96              20/3/96                        Benefits can be claimed

c.         11/3/96                        1/4/96              15/4/96                        Benefits can be claimed

d.         11/3/96                        1/4/96              16/4/96 and later          Benefits cannot be claimed

 

5. If in the view of the IM the claim is not valid, the IM should revert to the Clearing House within seven days from the intimation day.

 

6. All monetary corporate benefits viz., dividend, interest and redemption amount claim on company objections claimed by the RM while reporting objections shall be debited/credited directly in the clearing account of the clearing members by the Clearing Corporation.  The equivalent value of the benefits (as per Annexure - 10.1) claimed by the receiving member shall be debited by the Clearing Corporation to the account of the IM and the credit for the same shall be given to the respective RM alongwith the close-out of objections for the settlement.

 

7. In case of non-monetary benefit claims viz., bonus and rights, the IM may submit corporate benefit in the form of shares along with rectified/replaced shares.  In case the IM does not submit the corporate benefit in the form of shares along with the rectified/replaced shares, the equivalent value of the benefits (as per Annexure-10.1) claimed by the receiving member while reporting objections, shall be debited by the Clearing Corporation to the account of the IM and the credit for the same shall be given to the respective RM along with the close-out of objections for the settlement. The introducing member will submit the non-monetary benefits claimed in proportion to the quantity of shares rectified/replaced by the member.

 

8. Members are required to affix a rubber stamp bearing words 'Bonus/Rights enclosed' on the delivery slips, at the time of submitting the rectified/replaced shares, for cases where the shares are submitted as corporate benefits.

 

9. Members should not enclose cheques towards payment of corporate benefits (except cheques for non pari-passu shares) along with rectified/replaced shares. Wherever such cheques are attached, they shall be ignored and are required to be returned by the RM for cancellation.

 

10. In case of Rights (Equity, FCD, PCD-Convertible portion) if the IM gives corporate benefits in the form of securities, the IM will make a claim for the Rights Issue amount in the prescribed form BDC-2A in triplicate. The form BDC-2A will be submitted to the Clearing House along with the rectified company objections on the rectification day.

 

11. The form BDC-2A (two copies) will be issued by the Clearing House to the RM along with the pay-out of rectified shares. The RM is required to give a cheque (amount equal to the Rights Issue amount as mentioned in form BDC-2A) to the Clearing House in favour of the IM.  The cheque should be attached to form BDC-2A and the cheque details should be filled in Part-B of Form BDC-2A.

 

12. Where benefits in the form of securities are submitted along with rectified/replaced shares, the members should fill up the relevant portion of Form BDC-2A. IM may submit the total number of shares as corporate benefits. In case of part delivery of corporate benefits in the form of securities, the delivery must necessarily be in market lots.

           

13. Acknowledgement for non-monetary benefits submitted in the form of securities along with rectified/replaced shares shall be given on Form BDC-2A (IM copy).

 

14. Corporate benefits declared by the company after the receipt of delivery of rectified  objections are to be settled through pending corporate benefit cycle announced by the Clearing Corporation from time to time.

 

10A.12     Fake/forged SEBI registration rubber stamp

In case of fake/forged SEBI registration rubber stamp, members are required to give an undertaking to the Clearing Corporation stating that the rubber stamp impression appearing on the reverse of the transfer deed does not belong to the member and that the said rubber stamp is fake in the prescribed form 6I (copy enclosed).

 

However, if it is subsequently proved that the securities have indeed been introduced by the said member, then such cases will be reported to the Disciplinary Action Committee and the shares will be closed out immediately without intimation to the member.  The member will not be given the mandatory period of  21 days to rectify the said shares, once the undertaking is given by him.

 

10A.13                        Procedure for reporting Objection Bad / Benefit Bad Cases

 

1. Members are required to report Objection bad/ Benefit bad cases within 48 hours of the scheduled pay-out of such shares.

2. Members are required to submit the following documents alongwith form BDC-4A for submitting shares as objection bad or benefit bad.

a.  Form BDC - 1A along with transfer deeds and share certificates.

b. Delivery slip and delivery detail statement received along with the rectified/replaced   company objection lot.

c. Company Objection memo.

d. Form BDC 2A (in triplicate) for benefit bad cases, in addition to documents mentioned  above.

 

10A.14                        Schedule for reporting and rectification of objection

The following schedule for reporting and rectification of objection will be effective with immediate effect :

 

Reporting of Objections and Claiming

Corporate Benefits                                           Tuesday /Wednesday  

Date of Intimation                                             Friday                          Day 1

Pick up of Objections                                       Saturday

Reporting Invalid Benefit Claims  (if any)           Thursday                      Day  7

Price for valuation                                                                                Day 19

Rectification/Replacement of Objections

along with corporate benefits                             Thursday/ Friday          Day 21

Rectified Objection Pay-Out                             Monday          

 

The provisions for computation of equivalent value is given in Annexure -10.1.

 

10A.15            Transfer of debit for company objection cases falling under clause 100 of Uniform Good/Bad guidelines of SEBI, where the introducing member on the previous transfer deed is also an NSE member

 

In case of a company objection as per clause 100 of SEBI good/bad delivery norms, where the first introducing member on the previous transfer deed is also an NSE member, the debit borne by the intermediate introducing member on account of the close-out of processes, shall be transferred to the first introducing member, on the previous transfer deed.

Members are required to submit details of the objection reported against them earlier along with share certificates, copy of transfer deed where client is the transferee, copy of old transfer deed where their client is the transferor, original company objection memo, original form BDC - 1A pertaining to the objection lodged on them, delivery details statement pertaining to first time objection, delivery details statement of the shares having been received by them, auction square-up debit statement, to enable NSCCL to transfer the debit borne by the intermediate introducing member to the first introducing member.

 

10A.16            Valuation of unrectified company objections pending close-out against disabled member, subsequently declared defaulter/expelled

 

In cases wherein the company objections reported against a disabled member have not been closed-out and the member is subsequently declared a defaulter/expelled, all objections pending close-out are referred to the Defaulters'  Committee.

 

All company objections reported against defaulters/expelled members shall be valued at either of

 

a) the closing price as on the date of declaration of default/expulsion, or

b) the closing price as on the date on which the objection was reported to the Clearing House

whichever is later.

 

10A.17            Company Objections reported against Surrendering members

 

1. All the surrendering members shall co-ordinate and obtain information from the Clearing Corporation on a weekly basis, any instance of company objection(s) reported against them by other trading members.

 

2. The company objections reported against such surrendering members will be initially valued by the Clearing Corporation based on the notional price. The surrendering member shall be required to remit the notional amount so calculated, by the prescribed date and such objections shall be closed out as per procedures. Any negative difference arising between the close-out price and the notional price shall be payable by such surrendering member to the Clearing Corporation, and where such difference is positive, surrendering member shall be given due credit by the Clearing Corporation.

 

3. The notional price in all such matters will be closing price of the relative securities as on the date of reporting of the company objection or the closing price on the day last traded of the relevant security.

 

4. The respective surrendering member shall meet all such obligations by remitting the relevant amount to the Clearing Corporation within the stipulated 21 days from the date of reporting of such company objections, or within 10 days of intimation, of the notional amount payable, given to such surrendering member by the Clearing Corporation, whichever is earlier.

 

5. In the event of the surrendering member not meeting their obligations, such company objections would be met out of the deposits of the surrendering member. Consequently, if 85% of the value of the interest free cash security deposits and the available security deposit gets utilised, and if the member does not bring in funds to meet the balance company objections, then such surrendering member shall render himself liable for the Exchange/Clearing Corporation initiating the process of declaring such surrendering member a defaulter.

 

6. Upon such surrendering member being declared a defaulter, all the process and procedures applicable to that of a surrendering member shall cease forthwith and the relevant process pertaining to a defaulter shall ipso facto commence/apply.

 

10A.18            Company Objections valued at more than Rs. 20 lakhs

In cases wherein the value of company objection reported against the introducing member (IM) is greater than Rs. 20 lakhs, the company objection documents shall be withheld by the Clearing Corporation. The withheld documents would be released if the IM complies with either of the following :

1. deposits an amount with the Clearing Corporation, equivalent to the value of company objection reported against them

2. rectifies/replaces the securities reported under company objection

 


Item 11

 

In pursuance of Regulation 12 of the Capital Market Regulation, procedures for rectification/replacement of defective documents in addition to those mentioned in item 10 are hereby specified as under :

 

The original selling member (referred to as the 'introducing member') who is the first to deliver defective documents in NSE is responsible for rectifying defective documents ('objection cases') to the receiving member.

 

11.1     Market / Odd lot cases

 

Where the member reports an odd lot as under objection, if the same is not rectified/replaced within the required period, it will be squared-up as per Regulations regarding squaring up.

 

11.2     Unrectified Objection Cases

 

11.2.1              Valuation of Unrectified Objection Cases

 

At the end of the 21 day period (as per the schedule given in item 10A), all objection cases which have not been rectified/replaced (unrectified objections) shall be valued at the relevant valuation price.

 

If the value of the unrectified objections is more than Rs.5 lakhs, the introducing member shall be required to pay-in the full value of the unrectified objections (valuation debit) on the day following the objection rectification day.

 

11.2.2              Failure to Pay Valuation Debit

 

If the introducing member fails to pay-in funds on the due date of valuation debit, the gross exposure limit of the member may be reduced by the relevant authority in such manner and to such extent as it may deem fit.

 

11.2.3              Gross Exposure Limits

 

If the value of objections (after adjusting for objection withdrawals) is more than 50% of the net cash component of base capital available as defined below, then the gross exposure limit for the introducing member shall stand reduced by 8.5 times the value of objection cases.

 

Where the value of objections (after allowing for withdrawals) is more than 50% of the net cash component of base capital available then the member may replace/rectify cases before the 21 day period. To the extent objection cases are replaced/rectified, the gross exposure limits may be adjusted proportionately.

 

Members may deposit additional margins in the form of cash, bank guarantees or eligible securities towards objection cases. Gross exposure limits may be adjusted proportionately. Such margin deposits are required to be kept with the Clearing Corporation for a minimum period of 1 month.

 

11.2.4             Unrectified objections

 

If the defective documents are not rectified/replaced on or before the 21st day and the introducing member fails to pay-in funds on the due date of the above valuation debit, then the Clearing Corporation shall close-out the unrectified part of the defective documents as given below :

 

· The Clearing Corporation shall close-out the value of unrectified objections only upto 85% of the net base capital of the member. The member is required to bring in funds towards the objections which are closed-out by the Clearing Corporation by the prescribed (funds pay-in) date. In the event where the value of unrectified objections exceeds 85% of the net base capital and the introducing member fails to bring in additional funds to replenish the deposits depleted, such objections shall not be closed-out and such member shall be liable to be declared a defaulter by the Exchange/Clearing Corporation.

 

Net Cash Component of Base Capital

 

For the purpose of this item, the net cash component of base capital shall mean the base capital (refer Item 17, para 17.4) of the clearing member which is in the form of cash deposits after adjusting for any funds due from the member to the Clearing Corporation or Exchange.

 

Net Base Capital

For the purpose of this item, the net base capital shall mean the base capital (refer Item 17, para 17.4) of the clearing member after adjusting for any funds due from the member to the Exchange or the Clearing Corporation.

 

11.3                 Rectified / Replaced Objections Cases which are Bad Delivery

Rectified / replaced objections cases which are reported as bad delivery will be squared up as per Regulations regarding the same.

 

11.4                 Rectified Objection Cases which are under Objection

 

11.4.1              Close out

 

Objection cases rectified which are again reported as under objection will be immediately closed out between the original introducing member and the original receiving member as per Regulations regarding the same. In the case of corporate benefits the original introducing member shall be responsible for the corporate benefits to the original receiving member.

 

 

 

 

 

 

Item 12

 

In pursuance of clause 2(i) of Chapter IV and Chapter VI-B of the Byelaws and Regulation 12.7.1 and 12.14 of the Capital Market, the clearing members are required to comply with the following procedures in case where fake/ forged/ stolen securities are reported against clearing members:

 

12.1  Once a fake/ forged/ stolen case is reported as a company objection, the introducing member shall not any further deal with the client who delivered the fake/ forged/ stolen securities as directed earlier. Any contravention of this shall be viewed as a  serious violation and the Clearing Corporation may initiate such action as it may deem fit in this regard which may inter alia include withdrawal of the trading facility provided to the member.

 

12.2  The introducing clearing member shall provide to the Clearing Corporation, complete details of all securities received from the client (whose securities have been reported as fake/ forged/ stolen securities) delivered through the clearing house together with full details of the client including name, address, photograph, copy of client agreement, name and address of the person who introduced the client delivering the fake/ forged/ stolen securities to the clearing member and bank account details of the client within 14 days of date of intimation of the company objection.

 

12.3  The three-month period referred to hereinafter shall start from April 1998 and end on June 30, 1998 and thereafter the three-month periods shall be computed every three months.  For example, July 1, 1998 to September 30, 1998, October 1, 1998 to December 31, 1998 and January 1, 1999 to March 31, 1999 and so on.

 

12.4   Fake/ forged/ stolen securities equal to or exceeding Rs. 5 lakhs

 

12.4.1 If, within a three-month period as prescribed in clause (3) above, the cumulative value of fake/ forged/ stolen securities reported against the clearing member hereinafter referred to as  'reported value' exceeds Rs. 5 lakhs, then such clearing member shall, within 14 days from the date of intimation of the company objection, report to the Clearing Corporation, details of all securities delivered by the member on behalf of the clients who delivered fake/ forged/ stolen securities.

 

12.4.2 If, within a three-month period as prescribed in clause (3) above, the 'reported value' exceeds Rs. 5 lakhs, then such clearing member shall, within 14 days from the date of intimation of the company objection, deposit an amount equal to the 'reported value' in the form of cash, bank guarantee or FDR. For such clearing member, the base capital shall stand reduced by the 'reported value' and the gross exposure shall stand reduced accordingly till such deposit is brought in. Further the members may be called by the Sub-Committee of the Executive Committee of the Exchange and asked to explain the incidence of fake/ forged/stolen securities in a personal hearing. If the explanation given by such clearing member is unsatisfactory, the trading facility may be withdrawn.

 

 

 

12.4.3 Irrespective of the amount of fake /forged /stolen securities reported against the member, the Clearing Corporation may independently assess the value of fake/ forged/ stolen securities likely to have been delivered through the members hereinafter referred to as 'estimated value', in respect of any member as it may  deem fit. The assessment of the Clearing Corporation of the 'estimated value' shall be final for this purpose.

 

12.4.4 If the 'estimated value' exceeds Rs. 5 lakhs, then such clearing member shall, within 14 days from the date of intimation of the same, deposit an amount equal to the 'estimated value' in the form of cash, bank guarantee or FDR. For such clearing member, the base capital shall stand reduced by the 'estimated value' and the gross exposure shall stand reduced accordingly till such deposit is brought in.

 

12.5  The deposit shall be released/ the base capital may be restored, at the end of the subsequent two 'three-month periods' (six month period), provided the 'reported value' in the subsequent two 'three-month periods' does not exceed Rs. 5 lakhs.

 

12.6  Introducing clearing members shall file a police complaint/ FIR against the client who delivered the fake/ forged/ stolen securities to the clearing member, within 30 days from the date of intimation of company objection for fake/ forged/ stolen securities and produce proof thereof to the Clearing Corporation. Where introducing clearing members have not filed a police complaint/ FIR against the client who delivered the fake/ forged/ stolen securities to the clearing member within such period and (a)  the 'reported value/ estimated value' exceeds Rs. 5 lakhs and (b) individual claim is more than Rs. 1 lakh, trading facility which has been given by the Exchange to such trading/ clearing members may be withdrawn and the Clearing Corporation may initiate disciplinary action as it may deem fit

 

12.7  If the 'estimated value' or 'reported value' within any three-month period  (a) exceeds Rs. 2.5 lakhs, and 1% of average delivery values of the clearing member for the preceding two three-month periods, or  (b) Rs. 12.5 lakhs, then the member shall be disabled from participating in any auction till the last date of the subsequent three-month period.

 

12.8                 Deliveries received from other stock exchanges

 

In respect of securities received from other stock exchanges and delivered on NSE which are subsequently reported as fake/ forged/ stolen securities, the introducing member on NSE shall furnish evidence of having received the delivery from a recognised member of the other stock exchange to the satisfaction of the Clearing Corporation. Such deliveries may be excluded from the computation of value of fake/ forged/ stolen securities for such clearing member. Deliveries arising out of a spot transaction between the members shall not be excluded for such computation.

 

Further, the original introducing member on NSE shall provide following details to the Clearing Corporation :

                                                            Objection details

Objection Inward No. (on NSE)          

Security symbol           

Series  

Quantity          

 

 

Other Exchange details

 

Stock Exchange from where securities were received   

Name and SEBI registration code of delivering member

of other Exchange from whom securities were received 

Settlement Number and Date of receipt of securities on other Exchange

 

Security details

 

Certificate no.  

DNR (from)    

DNR (to)        

 

 

In addition, the clearing member shall submit copies of following documents :

 

· Annexure BDC-1A pertaining to the said objection inward number

· Receipt statement from the stock exchange showing above details certified by the

stock exchange concerned.

 

Clearing Corporation may exclude such deliveries from other Exchanges from the computation of value of fake/ forged/ stolen securities for such clearing member provided they are not spot transactions between members but have been received through normal exchange settlement.

 

12.9  The Clearing Corporation shall determine from time to time the date and prices for     valuation of the fake/ forged/ stolen securities reported against clearing members. In the normal course, the latest closing price will be taken into consideration for the valuation.

 

12.10  All cases of company objections pertaining to fake/forged/stolen securities reported against the introducing member shall be closed-out by the Clearing Corporation subject to the  provisions of clause 11.2 of  item  11.

 

12.11  Verification of securities

 

Members are advised to get the securities verified by the respective company/ registrars regarding the genuineness of the certificate before delivering the same on the Exchange. In cases where the company/ registrar confirms that the securities are fake/ forged/ stolen, members are required to report such cases to the Clearing Corporation along with a letter from the company/ registrar and other relevant documents.

 

In case the securities received by the receiving member from the delivering member in normal pay-out are found to be fake/ forged/ stolen, the receiving member is required to report the same as bad delivery in the bad delivery cycle against the delivering member.

 

The delivering member shall be required to replace such securities by the prescribed pay-in day for rectification of bad delivery, failing which the securities shall be closed out as per procedures. Once the identity of the introducing member is established the auction / square up amount debited to the delivering member shall be recovered from the introducing member or the delivering member may subsequently report such securities as company objection against the introducing member as per the existing procedures.

 

However, if the securities detected as fake/ forged/ stolen are delivered by a member who also happens to be the introducing member on the NSE, such securities shall be marked as short delivery and directly closed-out.

 

12.12   Verification of  deliveries for Lost/ Misplaced/ Fake/ Forged/ Stolen shares

 

Members are required to provide details of all deliveries submitted to Clearing House in 3.5" floppy diskettes in the prescribed format. In cases where shares in the said deliveries are found to be lost/ misplaced/ fake/ forged/ stolen shares as per the system implemented by NSCCL for this purpose, the procedure for reporting and replacement of such deliveries are given below:

 

Normal Settlement

Upon detection of the share certificates through the database maintained by the Clearing Corporation out of the data provided by the companies/STAs, the delivering member, the introducing member and the receiving member will be informed about the said share certificates and the introducing member and the delivering member will be advised to get a confirmation from the company/STAs for the said shares within ten days. The share certificates shall be sent to the company/STA for pre-verification or such pre-verification be carried out by the authorised representative of the company/STA in the Clearing House and objection memo, wherever such share certificates are confirmed to be defective in title, be obtained from the company/STA.

 

Delivering Member and Introducing Member are same

If the delivering member does not furnish any information/ proof confirming such share certificate(s) being good delivery within the above specified period, the same shall be closed-out against the delivering member.

 

Delivering Member and Introducing Member are different

If the delivering member does not furnish any information/ proof confirming such share certificate(s) being good delivery within the above specified period, the same shall be closed-out against the delivering member. The close-out debit so incurred by the delivering member will be passed onto the introducing member, within a reasonable period.

 

Auction, Rectified/Replaced Bad Delivery, Rectified/Replaced Company Objection

 

Upon detection of the share certificates as per procedures detailed above, the delivering member and the introducing member shall be informed about the said share certificates. The share certificates shall be sent to the company/STA for pre-verification or such pre-verification be carried out by the authorised representative of the company/STA in the Clearing House and objection memo, wherever such share certificates are confirmed to be defective in title, be obtained from the company/STA.

 

Delivering Member and Introducing Member are same

The shares shall be closed-out against the delivering member

 

Delivering Member and Introducing Member are different

The shares shall be closed-out against the delivering member. The close-out debit so incurred by the delivering member will be passed onto the introducing member, within a reasonable period.


 

Item 13

 

In pursuance of Regulation 7 and 12 of the Capital Market Regulation procedures for certification of good/bad delivery are hereby specified as under :

 

13.1          Procedure to be followed for Good/Bad delivery certification.

 

Members against whom bad deliveries are reported and who require certification from the Clearing Corporation regarding the good/bad delivery of the said documents are required to affix good/bad delivery memo coupon for Rs 30/-. Members are required to affix such coupons only in cases which need certification from the Clearing Corporation.

 

The deliveries which have originated from a different Regional Clearing Centre ( ie where the delivering centre and the receiving centre is not the same ), the receiving member shall be required to report the bad deliveries at Mumbai - Clearing Centre.  The certification of good/ bad deliveries for these deliveries shall also be done at Mumbai - Clearing Centre only.  However in cases where the delivering centre and the receiving centre are the same, the certification of good/bad deliveries shall be done at the respective RCC's.

 

In such a case, members are required to submit the following documents for good/bad delivery certification.

 

1. Bad delivery memo coupon

 

2. Prescribed Form  6B1 ( in duplicate)

 

3. Original transfer deed and share/debenture/bond certificate

 

4. One photocopy of each transfer deed and each share/debenture/bond certificate

 

5. Photocopies of delivery slip and delivery  details statement

 

6. Members are required  to submit documents mentioned in points 1 and 2 in a plastic pouch.  An additional copy (third copy) of form 6B-1 should be attached  outside the pouch.

 

7. Members are required to affix a good/bad delivery memo coupon of Rs. 30/- for each delivery. The coupon should be affixed on the duplicate copy which will be retained by the  Clearing Corporation. The documents shall be returned to the members after due certification  by the Clearing Corporation.

 

8. The clearing house will affix inward nos. on Form 6B-1.

 

9. Members are required to attach copy of form 6B-1 duly certified by the Clearing Corporation, to the transfer deed and share certificate every time the same set of documents are delivered in the market.

 

 

 

 

 

13.2     Procurement of Bad delivery memo coupon

 

1. The coupons for certification of good/bad delivery will be available from the Clearing Corporation.

 

2. The value of each coupon is Rs. 30/-. One coupon book contains 50 such coupons. 

 

3. Members may procure the good/bad delivery memo coupon book from the Clearing Corporation  by submitting a demand draft for Rs. 1500/- ( per coupon book) favouring 'National Securities Clearing Corporation  Limited'  payable at Mumbai.

 

4. Any request for certification of good/bad delivery will not be entertained by the Clearing Corporation unless the above procedures are complied with.

 

5. Members shall ensure that a photocopy of the certification issued by Clearing Corporation is always attached to the certified documents whilst redelivering the documents in future settlements, to avoid any subsequent receiving member raising bad delivery on the same count/reason.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 14

 

In pursuance of Regulation 7 of the Capital Market, revised procedure for reporting and rectification of request cases are hereby specified :

 

14.1.1              Revised procedures for handling Request cases :

 

1.  Members are required to report request cases to the Clearing house in plastic pouches  as per the schedule given below.

 

2.  Members are required to report request cases with original documents (transfer deeds and share certificates) for normal request cases and with photocopies of the relevant documents for dividend request cases.

 

Notwithstanding what has been stated hereinabove regarding reporting of non pari passu dividend request cases with photocopies of transfer deed and share certificates, the Clearing Corporation may, on a case by case basis, waive such requirements in cases where information regarding non pari passu dividend is made available to the Exchange at a later date or the non pari passu dividend is modified/ cancelled by the company and consequently:

 

a. the Receiving Member is unable to claim non pari passu dividend/ enhanced non pari passu dividend, subsequently declared by the company

b. the Delivering Member is unable to claim the non pari passu dividend paid by them, which is subsequently cancelled/ reduced by the company

 

Copies of the delivery detail statement, whereby the members received/ delivered the shares, are required to be enclosed, while reporting such cases.

 

The Clearing Corporation may at its discretion also waive coupon charges in such reported cases.

 

3.  Request cases should be reported and rectified in market lot only.

 

4.  The RM should submit a copy of the delivery slip and the delivery details statement

 

5.  Members shall report request cases in the prescribed Form 6 F (given in NSE F 6F), only for the specific reasons as given in Annexure 14.1. The Form 6F, is required to be submitted in triplicate, of which two copies should be firmly attached on the pouch, and the third (original) copy should be attached to the lot inside the pouch.  The lot should be so placed in the pouch that all details mentioned on Form 6F are clearly visible, without having to open the pouch.

 

6.   Members reporting request cases are required to affix  a coupon of Rs.100/- on Form 6F.

 

7.   Form 6F should be complete in all respects.  Incomplete/incorrect  forms are liable to be rejected.

 

 

 

 

Schedule for reporting and rectification of Request cases :

 

Reporting of request case by the RM                                        Thursday         

Pick up of request case for rectification to the DM                     Monday                       Day  1

Pay in  of rectified request case / withdrawal  by the DM           Monday                       Day  21

Pay out of the rectified request case to the RM              Thursday                      Day  24

Reporting of Request Rebad by the RM                                    Friday                          Day  25

Pay out of Request Rebad  to the DM                                       Saturday                       Day  26

 

14.1.2              Time period for reporting Request Cases

The time  period for reporting request cases shall be upto one year  from the last book closure of the respective scrip.

 

14.1.3              Closing Out

Members are required to rectify request cases by the prescribed day failing which such cases shall be closed out at the previous day's  closing price.

 

14.1.4              Procurement of Rs. 100/- coupon for reporting request cases

 

1. The coupon for reporting request cases will be issued by the Clearing Corporation.

2. The value of each coupon is Rs. 100/-.  One coupon book contains 10 such coupons.

3. Members may procure the coupon from the Clearing Corporation by submitting a demand draft for Rs. 1000/- (per coupon book) favouring 'National Securities Clearing Corporation Limited' payable at Mumbai.

 

14.2.1              Revised procedures for reporting normal bad deliveries

 

1.     The receiving member is required to report normal bad deliveries in plastic pouches.  Each delivery should be enclosed in a separate pouch.

2.  The bad deliveries are required to be submitted in revised form 6B as prescribed by the Clearing Corporation, on a paper of uniform (A4) size. (given in Forms NSE F 6B)

3.   The Form 6B, is required to be submitted in triplicate, of which two copies should be firmly attached on the pouch, and the third (original) copy should be attached to the lot inside the pouch.  The lot should be so placed in the pouch that all details mentioned on the Form 6B are clearly visible, without having to open the pouch.

4.    A copy of delivery details statement should be attached to the lot inside the pouch.

5.   Members are required to report all bad deliveries pertaining to a delivery number in the same 6B form.  If details of certificate nos., etc. are given in a separate paper,  as annexure to form 6B, the annexure should contain the details of those shares which are to be reported as bad delivery and the same should be stamped by the receiving member.

6.  If the same set of distinctive numbers are to be reported as normal bad delivery and dividend bad delivery , then both the reasons should be mentioned on the same Form 6B.  However if the distinctive nos. reported as normal bad delivery are different from those reported as dividend bad delivery, then separate Form 6B's should be used.

7.  Form 6B should be complete in all respects.  Incomplete forms or forms not conforming to the prescribed size and format are liable to be rejected.

 

14.2.2              Rectified pay in of bad delivery

1. The delivering member should submit rectified bad deliveries along with the original Form 6B in the plastic pouch.

2. The delivering member should indicate on the form 6B if the shares are rectified and/or replaced.

3. If the delivering member is rectifying either the share certificate or the transfer deed or both, the same should be clearly indicated  in the specified column in form 6B.

4. If part quantity is replaced / rectified, then a shortage letter should be attached as per the format prescribed by the Clearing Corporation, giving the  details of unrectified deliveries.  Members are required to report unrectified bad delivery cases in the prescribed form 6B-2.

 

14.3                 Bad Deliveries valued at more than Rs. 20 lakhs

In cases wherein the value of bad deliveries reported against the delivering member (DM) is greater than Rs. 20 lakhs, the bad delivery documents shall be withheld by the Clearing Corporation. The withheld documents would be released if the DM complies with either of the following :

 

1. deposits an amount with the Clearing Corporation, equivalent to the value of bad delivery reported against them

2. rectifies/replaces the securities reported under bad delivery

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 15

 

In pursuance of Regulations 15 of the Capital Market Regulations, procedure for appointing authorised representatives and use of Clearing House is specified as under:

 

15.1                 Authorised Clearing House Representatives/ Clearing Assistants

Each CM clearing member can appoint five authorised representatives for each clearing house to deliver and receive securities through the Regional Clearing House and Central Clearing House. A member should make separate applications for designating these authorised representatives as per the revised Form No. NSE - F 8. NSCCL will issue an Identity Card to each of these representatives. The authorised representatives shall display this ID card on their person at all times they are in the clearing house premises. This ID card is non-transferable and must be surrendered immediately to the clearing house upon cessation of employment of any of the authorised representatives. Any loss or theft of this ID card should also be promptly informed to the clearing house.

 

15.1.A Charges for identity cards for authorised representatives of member

 

Members

Clearing Members

Cusotdians and other Clearing with high delivery volumes

No. of cards to be issued         

                    5

Maximum 10

Charges

                 NIL

Nil upto 5 cards

Rs. 1000 per card for more than 5 cards

Charges for new cards where the old cards

 are returned (owing to change

 of members representative)

              Rs. 300/-

Rs. 300

 

Charges for duplicate cards where  the old card is damaged and returned

 for issue of fresh cards

               Rs. 300        

 

Rs. 300

Charges for additional cards where

the old cards are lost/ misplaced or

are not returned                                   

              Rs. 1000       

 

Rs. 1000

           

15.2                 Delivery at the allotted time

The delivering member should deliver all his delivery lots to the clearing house on the pay-in day for securities. The clearing house will acknowledge the delivery on a copy of the delivery statement.

 

15.3                 Receipt at the allotted time

The receiving member should collect the documents from the clearing house on the pay-out day of the securities.

 

Receiving members will be allotted time slots for collecting documents from the clearing house. The receiving member or his authorised representative will be required to acknowledge receipt of the documents on the copy of the receipt statement.

 

15.4                 Details of securities delivered to the Clearing House

Clearing members are required to submit details of securities delivered to the Clearing House in such form, including electronic form, as per the format prescribed by the Clearing Corporation from time to time.

 

Members are required to provide details of all deliveries to the respective Clearing House, in .5" floppy diskettes in the prescribed format. (format given in Annexure 15.1).

 

In cases where floppies are not submitted and /or where the floppies are not in the required format or where the floppies are found to be not readable, for such cases the procedures as  given in  Annexure 15.2  shall be followed.

The Clearing Corporation will specify, from time to time, the settlement types for which the clearing member should submit the above details.


 

Item 16

 

In pursuance of Regulation 13 of the Capital Market Regulations, the revised provision relating to clearing bank appointed by the Clearing Corporation, are hereby specified as under:

 

16.1                 Designated Clearing Bank(s)

Funds shall be settled through such Banks which are the designated Clearing Banks as prescribed by the Clearing Corporation. The list of clearing banks as on December 04, 2003 includes the following:-

 

1. Canara Bank Limited

NSE Branch

Varma Chambers, 1st Floor

Homji Street, Horniman Circle

Fort

Mumbai 400 001.

 

2. HDFC Bank Limited

Ground Floor

Maneckji Wadia Building

Nanik Motwani Marg

Fort

Mumbai 400 001

 

3. IndusInd Bank Limited

Hoechst House

3rd Floor

Nariman Point

Mumbai 400 021.

 

4. ICICI Bank Limited

Free Press House

215, Nariman Point

Mumbai 400 021

 

5.  UTI Bank Ltd.

Capital Market Division

1st Floor, Janmabhumi Bhavan

Janmabhumi Marg

Fort

Mumbai 400 001.

 

6. Bank of India

Stock Exchange Branch

Dalal Street, Fort

Mumbai 400 023

Tel: 2691509

Fax: 2655896

 

7. IDBI Bank Ltd.

Mumbai Branch

 Mittal Tower, 'C' Wing, Ground Floor,

 Nariman Point,

 Mumbai 400 021

 Tel  - 2812087,2811361/62

 Fax – 2814901.

 

8 Standard Chartered Bank

90, M.G.Road, Fort,

Mumbai – 400 001.

 

Every CM clearing member is required to maintain and operate  a clearing account with any one of the designated clearing bank branches. The clearing account is to be used exclusively for clearing operations i.e., for settling funds and other obligations to the Clearing Corporation including payments of margins and penal charges.

 

In addition to the above purpose, for CM clearing members who are participating in the Securities Lending Programme of NSCCL, the clearing accounts shall be used for carrying out all fund transactions pertaining to the Securities Lending Programme, unless otherwise specified by the relevant authority.

 

A CM clearing member can deposit funds into this account in any form, but can withdraw funds from this account only in self name.

 

A CM clearing member having funds obligation to pay is required to have clear balance in the clearing account on the stipulated funds pay-in day.

 

CM clearing members shall authorise the Clearing Bank to access their clearing account for debiting and crediting their accounts, reporting of balances and other information as may be required by NSCCL from time to time as per the format given in Annexure 16.1.

 

The Clearing Bank will debit/credit the clearing account of CM clearing members as per instructions received from the Clearing Corporation.

 

16.2     Procedure for change in  Clearing Banks

 

In case a CM clearing member  wishes to shift a clearing account from one designated clearing bank to another designated clearing bank, the following procedure is required to be followed:

 

1. The CM clearing member shall lodge his request with the Clearing bank where he is maintaining a clearing account, seeking permission to shift his clearing account to another designated clearing bank and send an acknowledged copy of the same to the Clearing Corporation.

 

2. The Clearing member shall obtain a "No Objection Certificate" (NOC) from his existing bank.

 

3. On receipt of the NOC from the existing bank, the Clearing Corporation shall issue a letter of introduction to the designated clearing bank.

 

4. The CM clearing member, on opening the account with the designated clearing bank, shall submit to the Clearing Corporation, the acknowledged copy of the letter sent to the new clearing bank (as specified in Annexure 16.1).

 

 

 

 

 


 

Item 16A

 

In pursuance of Regulation 14 of the Capital Market Regulations, the provision relating to CM clearing member's clearing account with a Depository Participant of the specified depository is hereby specified as under:

 

The CM clearing members shall operate a clearing account with a Depository Participant of the specified depository for the purpose of settlement of depository deals entered through the Clearing Corporation and for any other purpose as the relevant authority may specify from time to time.

 

In addition to the above purpose, for CM clearing members who are participating in the Securities Lending Programme of NSCCL, the CM clearing member's clearing account with a Depository Participant of the specified depository shall be used for carrying out all securities transactions pertaining to the Securities Lending Programme, unless otherwise specified by the relevant authority.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 16B

 

Mutual Funds Service System

 

Mutual Fund Service System (MFSS) deals with units of open ended mutual funds. Under MFSS, clearing members can buy or redeem units of mutual fund schemes using the existing network and order collection mechanism provided by NSE, and clearing and settlement mechanism of NSCCL.

 

The salient features of the facility are outlined below:

 

1. An investor who wishes to buy units of a mutual fund scheme or redeem them can use this facility provided by the NSE. In order to buy units, the member will be required to place a buy order.  A member who wishes to redeem units of a mutual fund scheme will be required to place a sell order on the system. All buy/sell orders are in terms of quantity only. The Spot market order book of the NEAT-IPO system will be used for collecting such orders.

 

2. Different mutual fund schemes may follow different pricing methods. These are usually based on NAV and are adjusted for load factors and costs. In some cases, prices may be known in advance whereas in other cases the actual prices may be communicated by a mutual fund at the end of day. In such cases, the price will be transmitted to members at the end of day. The pricing method followed by mutual funds for sale or repurchase of the mutual funds schemes will be communicated to members.

 

3. This service will operate settlement as prescribed by the relevant authority from time to time All orders for a day shall be settled accordingly. The settlement calendar for the same shall be communicated to members from time to time.

 

4. NSCCL shall compute members obligations and make available reports/data by T+1. The reports/data will be made available on the extranet server.

 

5. All orders will be settled on trade-for-trade basis and only to the extent of the units/funds paid in by members on the settlement day. The mutual fund shall be the counter party to all orders placed by members.

 

6. Settlement of units will be carried out in dematerialised form. The existing CM pool account/designated clearing account, with the depositories that is currently operated for the CM segment, will be utilised for this purpose.

 

7. Settlement of funds will be carried out through the clearing banks. Members will be required to open and operate a separate bank account with any of the clearing banks and authorise NSCCL to carry out debits/credits for this new facility.

 

8. The list of eligible mutual fund schemes shall be communicated to the members from time to time.

 

 

 

 

 

Members who wish to participate in MFSS are required to do the following –

 

1.         Execute the relevant undertaking (as per Annexure '16B.1') and submit the same to NSCCL. Please note the following in this regard:

2.         It must be executed on a non-judicial stamp paper of Rs. 100/- or as per the stamp duty payable at the place of execution, whichever is higher.

3.         The stamp paper should have been issued in the name of the Clearing Member on or before the date of the undertaking.  In case the undertaking is executed in the state of Maharashtra, the date of execution of the undertaking should be within six months of the date of the stamp paper.

4.         It should be duly notarised.

5.         Open a bank account with one of the clearing banks and issue a letter of undertaking (as per Annexure '16B.2') to the bankers irrevocably authorising the bank to debit/credit the bank account as per instructions received from NSCCL.

6.         Send a Letter of intimation to NSCCL conveying the name of the bank and bank account details (as per Annexure '16B.3').

7.         Members have the option to use their settlement account for the Capital Market operations for MFSS as well.


 

Item 17

 

In pursuance of Chapter VI(B) of the Bye Laws pertaining to Clearing and Settlement of deals and Chapter VII of the Bye Laws pertaining to Margins, the following are prescribed for TM clearing members :

 

17.1     Turnover & Gross Exposure

 

17.1.1              Intra-day turnover limit

 

Method of Computing Turnover

 

Gross Turnover for a member, across all securities in rolling settlement, shall be computed as (buy value + sell value) for the day.

 

TM clearing members are subject to intra-day trading limits. Gross turnover (buy + sell) intra-day shall not exceed 25 times times the net capital (base minimum capital (cash deposit and security deposit) and additional deposits, not used towards margins, in the nature of securities, bank guarantee, FDR, units of Mutual Fund or Government Securities or cash with the Clearing Corporation / Exchange).

 

If TM clearing members desire to increase the limit, additional deposits by way of cash or bank guarantee or FDR have to be submitted to the Clearing Corporation as per format in Annexure 17.1. Additional deposits by way of securities in electronic form ('demat securities') may be deposited as per procedures laid down in Annexure 17.6. These additional deposits other than deposits in the form of securities will be considered for the purpose of meeting margin requirements.

 

TM clearing members violating the intra-day gross turnover limit at any time on any trading day shall not be permitted to trade forthwith. Members are advised to keep tab on their trading activity in regards to their allowable exposure and turnover limits based on the capital deposited with the Exchange/ Clearing Corporation. TM may be permitted to trade on same day, if the additional capital is deposited with the Clearing Corporation upon violation.

 

If TM clearing member fails to bring the additional capital, TM clearing member may be permitted to trade from the next trading day with a reduced intra-day turnover limit of 20 times the net capital till margins in the form of additional capital as stipulated above are deposited with the Clearing Corporation.

 

TM clearing members will be given a maximum of 15 days time from the date of the violation to bring in the additional capital. Upon TM clearing members failing to deposit the margins within the stipulated time the reduced turnover limit of 20 times the net capital will be applicable for a period of one month from the last date for providing the additional margin deposits.

 

Upon TM clearing member violating the reduced intra-day turnover limit, the above mentioned provisions shall apply and the intra-day turnover limit will be further reduced to 15 times. Upon subsequent violations, the intra-day turnover limit will be further reduced from 15 times to 10 times and then from 10 times to 5 times the net capital. TM clearing members shall not be permitted to trade if any subsequent violation occurs till the required additional deposit is brought in.

 

A penalty of Rs.5000/- will be levied for violation of intra-day turnover limit, which shall be paid by next day. In case of subsequent violation during the day, penalty is increased by Rs. 5000/- for each such instance. (For example in case of second violation for the day the penalty levied will be Rs.10000/-, Rs.15000/- for third instances and so on).The penalty will be debited to the clearing account of the member. Non-payment of penalty in time will attract penal interest of 7 basis points per day till the date of payment. In addition to above penalty the member will also be imposed penalty points depending upon the quantum of violation as per item no. 8. However the relevant authority may impose additional penalty in addition to the above for such violation.

 

The penalty as indicated above would be charged to the members irrespective of whether the member brings in additional deposits subsequently or not.

 

17.1.2              Gross Exposure Limit

 

Method of Computing Gross Exposure

 

Gross exposure for a member, across all securities in rolling settlements, shall be computed as absolute (buy value – sell value), across all open settlements. Open settlements shall be all those settlements for which trading has commenced and for which settlement payin is not yet completed. The total gross exposure for a member on any given day shall be the sum total of the gross exposure computed across all the securities in which a member has an open position.

 

Further Gross exposure for all securities will be adjusted with security wise differential exposure multiples as applicable from time to time. (Refer Annexure 17.13).  For any new Security, differential exposure multiples will be set as, multiple applicable for Group 3, unless specified otherwise.

 

TM clearing members are subject to gross exposure limits, which shall be as under:

 

Net Capital ( Rs. Crore)

Gross Exposure Limit

0 – 1

8.5 times the net capital

> 1

Rs. 8.5 crs plus 10 times the net capital in excess of Rs.1 cr

 

Or, any such lower limits to certain members as decided by the relevant authorities. The net capital being the base minimum capital (cash deposit and security deposit) and additional deposits, not used towards margins, in the nature of securities, bank guarantee, FDR, units of Mutual Fund, Government Securities or cash with the Clearing Corporation and the Exchange.

 

TM clearing members exceeding the gross exposure limit shall not be permitted to trade with immediate effect and shall not be permitted to do so until additional capital is deposited or the cumulative gross exposure is reduced to below the gross exposure limits as defined above or any such lower limits as applicable to the members. Members are advised to keep tab on their trading activity in regards to their allowable exposure and turnover limits based on the capital deposited with the Exchange/ Clearing Corporation. Members who desire to reduce their gross exposure may submit their order entry requirements as per format in Annexure 17.7.

           

A penalty of Rs.5000/- will be levied for violation of gross exposure limit which shall be paid by next day. In case of subsequent violation during the day, penalty is increased by Rs. 5000/- for each such instance. (For example in case of second violation for the day the penalty levied will be Rs.10000/-, Rs.15000/- for third instances and so on).The penalty will be debited to the clearing account of the member. Non-payment of penalty in time will attract penal interest of 7 basis points per day till the date of payment. In addition to above penalty the member will also be imposed penalty points depending upon the quantum of violation as given in item no. 8. However, the relevant authority may impose additional penalty in addition to the above for such violation.

 

The penalty as indicated above would be charged to the members irrespective of whether the member brings in additional deposits subsequently.

 

17.2                 Position computation for margin calculation:

 

The margins shall be imposed on the exposure of the Clearing Member (CM) based on cumulative net position of their clients across all open settlements in rolling settlement. Open settlements shall be all those settlements for which trading has commenced and for which settlement payin is not yet completed.

 

The net position at a client level for a CM shall be arrived at and thereafter, it shall be grossed across all the clients for a CM to compute gross exposure for margin calculation.

 

Position computation and levy of margins in respect of each trade type would be as given in Annexure 17.2 enclosed.

 

The above position computation is only for the purpose of determination of margin obligations.

17.3   Daily margin for rolling settlements

 

The daily margin for rolling settlement shall be the following –

I)       Value at Risk (VaR) based margin

II)    Mark to market Margin

 

I) VaR based margin

VaR margin shall be applicable for all securities in rolling settlement.

 

All securities shall be classified into different groups as follows for the purpose of VaR margin.

 

Categorisation of stocks for imposition of margins

·        The Stocks which have traded atleast 80% of the days for the previous 18 months from (1st July 2001) shall constitute the Group I and Group II. (Annexure 17.3 ‘A’)

·        Out of the scrips identified above, the scrips having mean impact cost of less than or equal to 1% shall be categorized under Group I and the scrips where the impact cost is more than 1, shall be categorized under Group II.

·        The remaining stocks shall be classified into Group III.

·        The impact cost shall be calculated at 15th of each month on a rolling basis considering the order book snapshots of the previous six months. On the basis of the impact cost so calculated, the scrips shall move from one group to another group from the 1st of the next month.

·        The category for each security and applicable period shall be disseminated to members on the extranet server and to the public at large through the NSE – website. The file format for category of security is given in Annexure 17.3 ‘B’.

 

Value at Risk (VaR) based margins

  • For the stocks in Group I, the VaR margin will be scrip VaR (3.5 sigma) computed as per present method.
  • On the stocks in Group II, the VaR margin shall be higher of scrip VaR (3.5 sigma) or three times the index VaR, and it shall be scaled up by root 3.
  • For the stocks in Group III, the VaR margin would be equal to five times the index VaR and scaled up by root 3.
  • For the purposes of determining the margins for Group II & Group III, the minimum Index VaR would continue to be taken as 5% as at present.
  • File format for VaR based margin rates is given in Annexure17.4

 

VaR margin rate for a security shall constitute the following:

a)      Value at Risk (VaR) based margin, which shall be arrived at, based on the methods stated above. The index, for the purpose, shall be higher of the daily Index VaR based on S&P CNX NIFTY or BSE SENSEX. The index VaR shall be subject to a minimum of 5%.

b)      Additional VaR Margin:  6% as specified by SEBI.

c)      Security specific Margin: NSCCL may stipulate security specific margins for the securities from time to time.

 

The VaR based margin shall be rounded off to the next higher integer (For E.g.: if the VaR based Margin rate is 10.01, it shall be rounded off to 11.00) and capped at 100%.

 

Margining for securities in Trade for Trade Surveillance (TFTS) Market Deals  is as given below :

 

a)      Gross exposure limits shall be applicable. All these securities under TFTS shall attract differential exposure multiple (DEM) applicable for Group III securities in normal market (currently 8.5 times).

b)      Mark to market margins as applicable shall be collected on T+1 day basis. 

c)      VaR margin as applicable for Group III securities in normal market shall be collected on T + 1 day basis.

 

Further, benefit for early pay-in (EPI) of securities shall be given as per the existing procedure to the extent of the delivery position on a trade to trade basis using First in First out method. 

 

 


 

II)        Mark to Market (MTM) Margin

 

Mark to market margin is computed on the basis of mark to market loss of TM clearing member. Mark to market loss is the notional loss which TM clearing member would incur in case the cumulative net outstanding position of TM clearing member in all securities, at the end of the relevant day were closed out at the closing price of the securities as announced at the end of the day by the NSE. Mark to market margin shall be calculated by marking each transaction in scrip to the closing price of the scrip at the end of trading. In case the security has not been traded on a particular day, the latest available closing price at the NSE is considered as the closing price.

 

It is clarified that in the event of the net outstanding position of TM clearing member in any security being nil, the difference between the buy and sell values shall be considered as notional loss for the purpose of calculating the mark to market margin payable.

 

Client-wise MTM profit/loss across different securities within the same settlement shall be set off to determine the MTM loss for a settlement. Mark to market profits in one settlement shall not be adjusted against mark to market losses of the other settlements. Mark to market profits of one client shall not be adjusted against mark to market losses of other clients.

 

17.4       Dissemination of VaR Margin rates:

VaR margin rate for each security shall be disseminated at the end of each trading day and the same shall be applicable on the positions at end of next trading day.  The data shall be made available in the extranet server by 6.30 pm at the end of each trading day.

 

Members are requested to refer to Annexure 17.4 for the details of the file format for the above.

 

17.5             Deposit of additional base capital for the purpose of Gross exposure/Intra-day    

             Turnover limits and for margins.

 

If TM clearing members desire to increase the limit, additional deposits (ABC) by way of cash, bank guarantee, Fixed Deposit Receipt (FDR), securities, units of Mutual Fund or Government Securities have to be submitted to the Clearing Corporation. In case of additional deposits by way of cash, members are required to submit a letter as per format in Annexure 17.1 and Annexure 17.1.A

 

17.5.1     Cash and non-cash component of additional capital and margins

The minimum cash component of the additional capital and margins shall be 50 %. The cash component may be in the form of cash or cash equivalents. Cash equivalents would be as follows.

a. Cash equivalent shall include FDRs, bank guarantees (as specified below), Government securities and units of the schemes of liquid mutual funds or government securities mutual funds (by whatever name called which invest in government securities).

 

 

 

b. The haircut for Government securities shall be 10%.

c. The hair cut for units of the schemes of liquid mutual funds or government securities mutual funds (by whatever name called which invest in government securities) shall be atleast 10% of Net Asset Value (NAV).

d. The bank guarantees shall be considered as cash equivalent only if the guarantees have been provided by the banks whose networth is more than Rs 500 crores.

 The exchanges shall lay down exposure limits either in rupee terms or as percentage of the Trade Guarantee Fund (TGF)/Settlement Guarantee Fund (SGF) that can be exposed to a single bank directly or indirectly and in any case the exposure of the TGF/SGF to any single bank shall not be more than 15% of the total liquid assets forming part of TGF/SGF of the exchange. The exposure as mentioned above would include guarantees provided by the bank for itself or for others as well as debt or equity securities of the bank which have been deposited by members for additional capital or margins.

The additional deposits of the member shall be used first for adjustment against gross exposure of the member. After such adjustments, the surplus additional deposits, if any, excluding deposits not available for margins, shall be utilised for meeting margin requirements. All additional deposits in the form of Cash, FDRs, bank guarantees, Government securities and units of the schemes of liquid mutual funds or government securities mutual funds (by whatever name called which invest in government securities) are available for the purpose of payment of margins. Statement of Breakup of Capital and collateral is available in MG 05 Report to the members.

 

17.6    Trade Modifications at order level:

 

Trading Members are required to enter the Client Code at the time of order entry in the NEAT system.

 

Trading Members, who desire to correct the client codes subsequently, will be provided with a facility to modify client codes at order level (not at trade level) on the trade date, after market hours. However, proprietary trades shall not be allowed to be modified to client trade and vice-versa. The trade modifications request shall be considered till 4:45 p.m. on the relevant trading day. The structure of the file format for such trade modifications will be as per Annexure 17.5 enclosed.

 

17.7     Dissemination of Client level Position for a Clearing Member:

 

The Client Level Positions will be disseminated to all Trading Members through the Detailed Margin report (MG02) which shall detail the provisional margin obligation on account of non-institutional trades.

 

These files will be made available for the custodians in their respective sub-directories and on the extranet server for the trading members.

 

 


 

17.8    Margin Payment and Pay-out

 

17.8.1              Payment of margin

 

TM Clearing Members are responsible to compute margin payable and to make suitable margin payments on the due date. All margins are payable on trade day plus one. TM clearing members are required to deposit the margin money due in cash, bank guarantee, FDRs, units of  liquid mutual fund or Government Securities  rounded off to the next higher multiple of Rs.10,000/-.

 

17.8.2                Pay-out of Margin 

 

The margins deposited in cash on a given day may, if the Clearing Corporation chooses not to exercise its lien pursuant to the Bye Laws, Rules, Regulations and circulars issued in that behalf, be returned to TM clearing member on the subsequent day after adjustment for margin, additional base capital and any other funds dues and shall be recovered by the Clearing Corporation for the due fulfillment of all obligations and liabilities arising out of or incidental to any deals made subject to the Bye Laws, Rules and Regulations of the Clearing Corporation or anything done in pursuance thereof. The Clearing Corporation may, at its discretion retain part or whole of the amount releasable cash margin amount, with respect to any member as a risk containment measure.

 

17.9                 Exemption for Institutional Deals

 

While computing gross exposure limit and applicable margins, institutional deals shall be excluded.

 

17.9 .1             Institutional Deals

 

Deals executed on behalf of the following entities shall be considered as institutional deals:

1.         Financial Institutions

2.         SEBI registered FIIs

3.         Banks

4.         SEBI registered Mutual Funds

 

Deals shall be identified by the use of the participant code in the trades reported on the NSE.

 

Deals entered into on behalf of custodial participants i.e. carrying custodial participant code shall be considered as institutional deals unless not confirmed by the respective custodians in which case the deals shall attract normal margins.

 

Non-Custodial Institutional Deals shall be identified by the use of the participant code ‘NCIT’. The ‘NCIT’ deals will be exempted only for normal margin purposes and the settlement obligation will remain with TM clearing member. Non Custodial Institutional deals, which are not marked, as ‘NCIT’ at the time of order entry, will not be exempted.

 

All TM clearing members are required to provide details of the contract notes for all Non-Custodial Institutional Trades through a file upload as per the procedure laid down in the Annexure 22.1.

 

17.10               Trade Warehousing

 

Daily margins shall be charged to TM clearing members for all warehoused trades as permitted under circular no. NSE/CMO/0011/98, dated June 30, 1998 of the Exchange. The margin payments in respect of warehoused custodial trades shall be exempted after the final confirmations are received from the custodians on the specified date or after TM clearing members confirm the issuance of contract notes to the institutions through the file upload facility as per the procedure laid down in the Annexure 22.1

 

Non-Custodial Institutional Trades (NCIT) marked as warehoused trades shall also be subject to margins. The Warehoused NCIT deals shall be exempt from margins after TM clearing members confirm the issuance of contract notes to the institutions through the file upload facility as per the procedure laid down in the Annexure 22.1. 

 

17.11               Exemption from margin payment upon delivery of securities

 

If TM clearing members deliver securities prior to the securities pay-in day, after satisfying the conditions mentioned below, then the margin payable by TM clearing member will be recomputed after considering the above pay-in of securities.

 

The benefit on account of early payin (EPI) of securities shall be given to the extent of the net delivery position across all clients of the Member. The EPI would be allocated to clients having net deliverable position, on a random basis. However, members shall ensure to pass on appropriate early payin benefit of margin/exposure to the relevant client, until the above system is in place.

 

The conditions referred to are as follows:

(a) TM clearing member has an obligation to deliver the securities.

(b) Early payin of securities is delivered on or before 2:45 p.m. on working days and confirmed with the depository system.

 

17.12               Close out of Positions

 

In case of TM clearing members who have not been permitted to trade and remain disabled, the outstanding positions, if any, may be closed out to the extent possible by the Exchange/Clearing Corporation at the absolute discretion of the relevant authority without further notice or intimation to the concerned member.

 

In case of violations of gross exposure limit or intra-day turnover limit occurring after 2 p.m., the Exchange may close out open positions to the extent possible at the absolute discretion of the relevant authority without further notice or intimation to the concerned member.

 

17.13.1            Procedure for delivery

 

Delivery of securities in dematerialized mode shall by itself not be taken as entitlement for benefit for pre pay-in but shall be subject to delivery obligations and confirmation of delivery is effected.

 

(a) In the case of delivery from NSDL:

 

TM clearing members shall deliver the said securities to their CM Pool Account and execute irreversible delivery out instructions through their Depository Participant, for the particular settlement, any working day prior to securities pay-in day.

 

(b) In the case of delivery from CDSL:

 

The TM Clearing Members has to open separate early pay-in account with CDSL through NSCCL; the detailed procedure is given in Annexure 17.12, 17.12A, 17.12B.

 

17.13.2            How requests will be processed:

 

For early pay-in in demat mode, the receipt of securities will be confirmed with the depository system at 2:45 pm and securities credited till 2:45 pm shall be taken into account on the same day for the purpose of re-computation of margin and / or gross exposure limits.

 

17.14               Effect of failure to pay margins

 

Non-payment of either the whole or part of the margin amount due will be treated as a violation of the Bye Laws of the Clearing Corporation and will attract penal charges and penal points as given in item no. 8. Without prejudice to the foregoing, the Clearing Corporation may, within such time as it may deem fit, advice the Exchange to withdraw any or all of the membership rights of TM clearing member including the withdrawal of trading facilities without any notice.

 

In the event of withdrawal of trading facilities, the outstanding positions of TM clearing member may be closed out forthwith or any time thereafter by the Exchange, at the discretion of the Clearing Corporation, to the extent possible, by placing at the Exchange counter orders in respect of the outstanding position of TM clearing member without any notice to TM clearing member, and such action shall be final and binding on TM clearing member.

 

17.15               Effect of violation of intra-day turnover limit and gross exposure limit

 

Any violation of exposure limits will be treated as violation of the Bye Laws of the Clearing Corporation and will entail appropriate action under the Bye Laws, Rules and Regulation of the Clearing Corporation. In addition and without prejudice to the foregoing, the Clearing Corporation may, within such time as it may deem fit, advice the Exchange to withdraw any or all of the membership rights of TM clearing member including the withdrawal of trading facilities without any notice. In the event of withdrawal of trading facilities, the outstanding positions of TM clearing member may be closed out forthwith or any time thereafter by the Exchange, at the discretion of the Clearing Corporation, to the extent possible, by putting counter orders in respect of the outstanding position of TM clearing member without any notice to TM clearing member, and such action shall be final and binding on TM clearing member.

 

The Clearing Corporation may, in addition, take such disciplinary action as it may deem fit.

 

 

 

 

 

17.16               Submission of FDR as collateral for purpose of margins and exposures

All TM clearing members are permitted to submit fixed deposit receipt (FDR) as an alternative to the existing options of submission of bank guarantee and cash deposit as collateral for purpose of margins and exposures.

 

In addition to the custodians (HDFC Bank Ltd , The Stock Holding Corporation of India Ltd and ICICI Bank Ltd) National Securities Clearing Corporation Ltd (NSCCL) shall provide safe custody of FDRs issued for the purpose of additional base capital.

 

The FDR should be issued for a minimum period of 3 months and payable at any of the branches situated in cities of Mumbai, New Delhi, Chennai, Calcutta, Ahmedabad and Hyderabad of the approved banks.The minimum value of FDR should be Rs. 2 lacs.  The list of approved banks is as per Annexure 18.1 of this circular. The FDR should be issued in the favour of “NSCCL - A/c TM CLEARING MEMBER” and should be deposited with NSCCL where the FDR is to be deposited in the safe custody of NSCCL. For other, the FDR will be issued in favour of the approved custodian (HDFC Bank Ltd, Stock Holding Corporation of India Ltd and ICICI bankl Ltd.) and should be deposited with the approved custodian.

 

The formats of the above letters are given in Annexure 17.8 and Annexure 17.9.

 

There are no charges levied by NSCCL for the above mentioned facility. Renewals of the said FDRs shall be the sole responsibility of the TM clearing members.

 

Banks can also submit auto renewal letters for renewal of FDR/for the benefit of the accrued interest  as per formats given in Annexure 17.14, 17.14A, 17.14B Annexure 17.15 and Annexure 17.16

 

17.17               Bank guarantees submitted towards margins and exposure limits

 

TM clearing members may opt for giving bank guarantee in the specified format as per Annexure 17.10 / Annexure 17.11 from any approved commercial bank towards margins and exposure limit requirements. The minimum period of bank guarantee towards margins and exposure limits should be 3 months.

 

TM clearing member may give bank guarantees only to the extent prescribed below in relation to the net-worth of the issuing bank:

 

Total Networth of Issuing Bank (Rs. In Crores)

Maximum Value of BGs that can be given from the Issuing Bank per TM clearing member (Rs. In Crores)

100 to 200

5

200 to 500

10

500 to 1000

15

1000 to 3000

20

 

The maximum value of bank guarantees that may be issued per bank shall be 15% of banks net worth or Rs. 500 crore whichever is lower.

 

 

17.18               Renewal/ Reduction/ Transfer of Bank Guarantees

 

TM Clearing member is required to ensure that the renewal of the bank guarantee is submitted to the Clearing Corporation in the prescribed format as per Annexure 17.11 one month before the date of expiry of the bank guarantee.  The format for reduction in the value of bank guarantee/ transfer of bank guarantee is given as Annexure 17.11.C and Annexure 17.18.

 

17.19               Pay-in of funds/securities prior to scheduled pay-in day

 

The relevant authority may require TM clearing members to pay-in funds and securities prior to the scheduled pay-in day for funds and securities. The relevant authority shall determine from time to time, the TM Clearing members who shall be required to pay-in funds and securities prior to the pay-in day. The relevant authority shall also determine securities and funds which shall be required to be paid in and the date by which such pay-in shall be made by the respective TM Clearing member.

The TM Clearing member would be required to make 25% of the total funds pay-in obligation as early payin. In case of early pay-in of securities, the TM Clearing member would be required to make atleast 50% of the total securities pay-in obligation as early pay-in, failing which the member would be required to deposit 20% additional margin. The relevant authority may, from time to time, make changes in the quantum of early funds/securities pay-in.

The value of such prior pay-in of funds and securities may not be reduced from the cumulative net position of the TM clearing member for the purpose of gross exposure reduction. Further, Clearing Corporation may or may not give any margin exemption for such pay-in of funds and securities.

 

17.20               Close-out of open positions

 

The relevant authority may require TM clearing members to reduce/close-out open positions to such levels and for such securities as decided by the relevant authority from time to time.

 

17.21               Imposition of additional margins

 

The relevant authority may require TM Clearing members to make payment of additional margins at any time on such securities and at such rates as decided from time to time. This will be in addition to the daily margins which are or may be imposed from time to time. The additional margin would be payable not later than one day after the imposition of the additional margin. 

 

17.22               Identification of specific securities

 

The relevant authority may determine, from time to time, the criteria for determining TM clearing members who are required to make pay-in of funds/securities prior to scheduled pay-in day. The criteria for determining the TM clearing members for whom, open positions would be subject to 17.19, 17.20 and 17.21 may include one or more of the following:

§         Concentrated positions in security/ies as compared to the net exposure in a settlement.

§         High concentrated positions in illiquid securities.

§         Total funds pay-in position (of all open settlements) vis-à-vis the cash component (in the total capital) of the TM clearing member.

§         High positions’ in high activity securities and/or positions attracting high MTM losses.

The relevant authority may also determine the TM Clearing members for whom open positions in specific securities would be subject to clause 17.19, 17.20 and 17.21 above. This will include members with open positions in securities where the perceived risk is significant in the opinion of the relevant authority. The criteria for identifying these securities may include one or more of the following:

·        Securities where total outstanding position is high

·        Securities where the variation between current prices and 52 week low is significant.

·        Securities which witness unusual increases in price-volume trends

TM clearing members shall be required to comply with one or more of the above clauses (17.19) to (17.21) as directed by the relevant authority from time to time, failing which the Clearing Corporation may initiate such action as it may deem fit, without further notice to the TM Clearing member, which may inter alia include withdrawal of trading facility and closing out of outstanding positions to the extent possible at the discretion of the Clearing Corporation.

 

 

17.22   Collection of Upfront Margins from Clients

 

Members are required to ensure collection of upfront margin from clients and deposit the same in a separate client account as required in respect of trades in Normal Market which would result in a margin of Rs.50,000/- or more after applying the margin percentages as decided by the relevant authority.

 

The upfront margins percentages are given below:

 

Groups

Securities Covered

Upfront Margin Collection rate (%) from clients

Group I

Annexure I

15%

Group II

Annexure II

30%

Group III

Annexure III

45%

The list of securities in each group is given in Annexure 17.13

 

17.23              Written confirmation from Clearing Banks

 

All bank confirmations received from clearing banks on behalf of the members towards margins shortages, funds shortages, EPI shortages and for cash debits towards additional base capital shall be given effect only after receiving a written confirmation from their respective clearing bank.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Item 18

 

In pursuance of Clause IV 2.3 of the Rules of the Clearing Corporation, the procedures for security deposit is specified as under:

 

18.1                 Scheme for deposit of securities

 

The security deposit is being taken as security for due performance and fulfillment by the TM clearing member of their engagements, commitments, operations, obligations towards the Clearing Corporation or any other party, arising out of or incidental to any contracts made, executed, undertaken, carried on or entered into by the TM clearing member on the Exchange/ Clearing Corporation and subject to Byelaws, Rules and Regulations. The minimum security deposit requirement is Rs. 17.50 lakhs in the case of an individual TM clearing member or a partnership firm TM clearing member and Rs. 25.00 lakhs in the case of a corporate TM clearing member on the Capital Market Segment. All TM clearing members have to comply with the security deposit requirement before their activation on the Capital Market Segment.

 

Failure to maintain capital requirement for continued admittance, Clearing Corporation may initiate action as it deems fit including withdrawal of trading facility.

 

The TM clearing members may opt to meet the security deposit requirement by way of the following:

 

i) Cash to be deposited with the Clearing Corporation,

 

ii) Bank guarantee in favour of National Securities Clearing Corporation Ltd. as per the specified format as given in Annexure 18.2 & 18.2A from approved banks. The list of approved banks is given in Annexure 18.1.

 

iii) Deposit of Fixed Deposit Receipts (FDRs) issued by approved banks and securities with our approved custodians.  The custodians presently approved for this purpose are HDFC Bank Ltd., Stock Holding Corporation of India Ltd. (SHCIL) and ICICI Bank Ltd.  The list of approved securities is given in Annexure 17.6 B.