Post on 23-Jan-2020
Association of National Exchanges Members of India
Presentation to National Stock Exchange
July 30, 2014
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ANMI Representation to NSE
A. Business Development Issues
Issues Observations Suggestions
Introduction of e- KYC
It will act as comprehensive platform
for the Investors which will help them
mapping KYC documents &
requirements electronically.
The investors can open Trading
Account by submitting paper
documents in digital format in secured
way.
We suggest introducing e-KYC. Inter
alia, it will help in the following:
No Physical documents
Reduced TAT
Account Opening at Remote Locations
Secured & will have privacy
Annexure Attached- A
Margining of Options Indian options market is extremely
skewed with a vast majority of the
liquidity and volumes only in NIFTY
options.
The concept of value-at-risk should be
used in calculating required level of
initial margins.
While the SPAN margin method
captures the portfolio risk, the Short
option minimum charge specified,
essentially renders the SPAN
calculations redundant in a vast
majority of cases. This is due to the
fact that the short option minimum
levels have been set extremely high.
The short options minimum is
inconsistent with Future margin
requirements, thus leading to incorrect
overall portfolio margin.
We suggest the SOM be reduced to
1% for indices and 2% for stock
options.
Annexure Attached-B
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Brokerage on Expiry Trades
In case of auto expired in-the-money
Options contracts, while STT is
allowed to be charged, brokerages are
not allowed.
As the broker does all the work related to
these trades like issuance of bill/reports to
customer, collection/payment of MTM
based on those trades etc. We advise that
brokerage on these trades should also be
permitted.
B. Compliance Issues
Issues Observations Suggestions
Trading Terminals and Approved Users
As per extant SEBI regulations, the
trading terminals can be installed only
at the broker’s head office, branch
office, sub broker or authorized
person’s office. The physical location
details of the trading terminal should
be intimated through the interface
provided by the exchanges.
It will not be feasible for the Broker to
check this compliance from a central
location as the dynamic IP address of
all such trading terminals will not allow
any central monitoring of the physical
address of such internet connected
trading terminals.
Periodic onsite audits covering 10 % of
the active sub brokers/ authorized
persons will continue as is done today
but it can never ensure 100%
assurance with this compliance
requirement which was relevant when
connectivity was based on leased
lines/ VSAT.
In the era of Internet, this requirement
may no longer be relevant or
practically feasible. Hence, we suggest
that this requirement should be done
away with.
Annexure Attached-C
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Client Running Balance beyond 5 days Debit balance continuous for 5 days
(beyond T+5) is treated as temporary
margin funding.
The threshold minimum may be made
as 1 lakh per client for this requirement
- similar to client funding upload.
In case where debit is more than Rs. 1
lakh, but the collateral is more than
sufficient, then debit may be allowed.
In any case, quarterly settlement
system prevails.
Self Trade Issue wrt Multiple Pro Account Ids
The business model of many
proprietary trading brokerages is to
employ a large number of traders,
each of whom is given a terminal and
a unique user ID as per exchange
requirements.
A large number of pro account
brokerages have deployed algo based
trading for high frequency as well as
arbitrage. These are also conducted
by traders using their trading interface
to enter parameters.
Therefore, there are a large number of
traders/user ids, all being operated
independently but under the pro code
of the broker.
In the case of members with many traders
trading using the pro account, it is entirely
possible that the trades have taken place
between these traders (user ids), though
on the exchange. However, as each of
these traders in on pro account, the trade
belongs to the same member.
We appeal NSE to take this issue with
SEBI and request them to consider the
‘User ID’ as the point of analysis for
calculating “self trades” instead of the
‘member ID’. Otherwise incidental activity
of “self trades” will be construed as unfair
trade practice.
There is an urgent need to resolve this
matter as it could lead to a virtual halt of
pro account trading by members.
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C. Cost Issues
Issues Observations Suggestions
Interest on Deposits with Exchange
Members Deposits lying with the
Exchanges do not carry any Interest.
We request that the Deposits be
treated at par with Additional Base
Capital and interest be passed to
members at the prevailing Bank Rate.
This measure will help in setting off
certain additional costs which the
members have incurred in recent years
due to increased regulatory compliance
and falling margins.
Alternatively, the same may be
replaced with Bank Guarantees.
Reduction in Transaction Costs The Transaction Costs have not been
reduced for a considerable period of
time.
We request for reduction in the
transaction costs, especially in Options
Segment. Cross Subsidy from other
new segments may be provided to
encourage the member to take up
membership of new segments and
encourage participation.
High Penalties We request for reduction in the penalties.
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D. Other Issues
Issues Observations Suggestions
Arbitration Reforms Clients default at one broker and trade
at another.
Members are obliged to report the
same to the stock exchanges.
If broker trades with defaulter, it is
considered violation of code of
conduct.
Voice recording is not mandatory but it
is observed that in many cases
absence of voice recording is taken
against the member during arbitration.
In cases where clients lose at
arbitration against the broker, we
request NSE to debar such clients
from further trading with any broker,
adjust the dues if available with other
broker (details available in UCC
database), prohibit the client from
directly or indirectly trading through the
exchanges till such time the client
deposits the award money in an
escrow account. The funds may be
released or impounded based on the
verdicts obtained in the appeal forums
available to the client.
Non-production of voice recording
should not be held against the member
as member is able to furnish other
evidences.
Monthly / Quarterly Settlement of funds
and securities
Easily done by banks (3 in 1
accounts), difficult for others.
Clients do not come back.
Inconvenience to clients.
Statement at odd times.
FDR created out of client funds not
allowed.
Half yearly and Annual Option may be
introduced.
We request to waive off requirement
for quarterly settlement for amounts
below Rs. 1 lakh.
If member chooses calendar quarter
statements, then settlement statement
need not be sent.
We suggest, FDR created out of client
funds should be free from settlement
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obligations if a clear Audit Trail is
available attributable to each FDR.
Internet trading statistics Stock brokers are required to manually
confirm the exchange figures every
day.
We are of the view that since
Exchange already has those numbers;
the requirement of individual
confirmation may be done away with
as it leads to duplication.
PAN number compulsory Currently PAN is compulsory (except
Sikkim)
Leaves out a lot of the population like
villages (a huge roadblock for financial
inclusion).
We suggest that where a person has
AADHAR, PAN should be made
optional for such persons (subject to
declaration that client does not have
PAN at all) & subject to investment of
Rs. 2.5 lakh. The same may be
monitored by depositories using
AADHAR data.
Rectification of Trade Error beyond online
modification deadline.
Online trades moved to ERROR
account. If errors are discovered after
market close, what to do?
We advise to allow movement to
ERROR with due noting in ERROR
register, for errors discovered post-
market hours. Any movement to
ERROR account is anyway free of
penalty.
Post market errors to be reported in
Internal Audit Report and checked
during Inspection.
Such Errors to be reported to
exchange before Pay in.
Pledging of Securities as Collaterals
All the custodians charge heavily
(0.04%) for creation and removal of
pledge (mostly in terms of percentage
of volume) in addition to the charges
levied by depositories.
The trading members that are also
depository participants should be
allowed to pledge securities directly
from their own DP accounts to the
clearing corporation. Pledging
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securities from TM’s own account does
NOT pose any additional threat to the
system.
Request to reduce Custodial charges
to Rs. 5 per transaction, until
implementation of above suggestion.
Acceptance of type of Collaterals
Government bonds, FMPs, MF units,
NSE listed debentures of A-group
companies, tax free listed bonds etc.
are not allowed as collateral.
We request the Exchange to approve
these as collateral. An early approval
of this will provide much needed
financial flexibility to members.
Fungible Collaterals
Currently, brokers are having online
facility for the transfer of FDRs from
one segment to the other segment but
not for Securities.
We advise that online facility be
provided to the brokers for the transfer
of collateral security from one segment
to the other.
Self Auction facility In case of internal trade position, self
auction facility is required.
We request for Self Auction facility in
NSE.
Internal Audit Separate Reports for all Exchange
Segments.
We request that a common format be
worked out for reporting at all
exchanges.
Net worth Certificates We request the exchanges to develop
a uniform format for net worth
certificates. Common criteria for net
worth calculation may be used.
UCC Data Management
Every exchange & depository has its
own set of data formats and separate
rules for UCC file uploads /
modification. E.g. State & Pin codes
masters are separate for each
exchange thereby for a single
customer data has to be managed and
uploaded in 3-4 different formats which
We request for a unified format.
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can easily be unified.
Further, data modification is also
permitted by some exchanges and
other exchanges do not allow changes
easily or have different rules for the
same.
We request for a set of common rules
in the interest of members.
System Audit
System Audit Report has been made
very complicated and lengthy.
We request that System Audit Report
should be common and made very
easy with all exchanges.
MFSS MFSS has some operational issues. The payin should be allowed to be
done from broker pool itself for any
redemption request of the client
instead of client beneficiary. Units
should be treated in demat settlement
wise in same manner as equity shares
for the settlement of constituent trades.
NEAT System It is run on age old system of turnover
control method.
We suggest that NEAT system should
have risk checks based on current
parameters of SEBI.
Corporate ID and FTP passwords Corporate ID and FTP passwords are
same which is a serious security issue
for brokers as different people have
different uses for each service within a
broker organization. The member
portal is given but it does not work in
the morning most of the times. Even it
connects; it is too slow to practical
work.
We suggest that member portal be
upgraded and different levels of
password security should be
configurable by brokers based on their
staff functioning.
CDS margin file issue In CDS segment both the margins are
mandatory for reporting and must be
collected on T day as per last margin
We request that members be allowed
to collect the increased margin i.e.
(EOD minus BOD margin) on T+1 day.
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file of T day which is normally provided
by NSE around 6 to 7 PM. It becomes
very difficult for members to collect
margin after 7 PM.
ANNEXURE- A
E-KYC/ Green KYC
What is Green KYC ?
• Green KYC is the next generation KYC platform for managing KYC electronically.
• Green KYC management is focused on addressing the key requirements & challenges
faced by the Investors during account opening.
• Green KYC provides comprehensive platform for the Investors which will help them
mapping KYC documents & requirements electronically.
• The investors can open Trading Account by submitting paper documents in digital format
in secured way.
Advantages of Green KYC
1) No physical documents
Green KYC will useful for Investors to open trading account using electronic
copy of their proof of identity, address & income in digital format.
2) Reduced TAT
Green KYC will open doors to innovative service provision for the Investors as a
hassle free system which will reduce TAT for Account Opening Process.
3) Account opening at Remote Locations
Digital devices such as Tablet PCs, Smart Phones, or Laptops along with
limited Internet connectivity this service can be extended across PAN India even
at remote locations which will help investors to open Trading Account easily.
Security & Privacy – Green KYC
1) Green KYC is instantaneous, totally secure & this will also enhance Privacy of data of
the Investors.
2) All Proofs for account opening will be digitally Scanned by the portable devices including
the photo identity proofs & stored using digital certificates.
3) Clients will sign the KYC form using Wet Signature using portable digital equipment this
will store clients signature in digital format.
4) This Process will also act as IPV which will help in :-
Customer Validation
Audio/Video consent can be taken at the time of account opening
It will reduce frauds at great extent
5) Green KYC in collaboration with UIDAI E-KYC will play a significant role in client
authentication.
Process Flow of Green KYC :-
1) The sales person will launch the Green KYC application on his digital equipment
2) The sales person will select the documents the customer need to provide against the
required list.
3) The sales person will captures the images of the documents.
4) The sales person will ask the Investor to sign the document on the digital instrument
itself or on separate paper and the document can be uploaded
5) The Green KYC app will attach the signature to the documents & Application form.
6) The system will generate the application reference number of the Investor to tag the
KYC form in the system.
7) The application once submitted from the Sales person synchs the data back to
the central application for back office processing.
Account Opening of Green KYC :-
1) Investor will confirm his willingness to open trading account based on that sales
executive will be assigned.
2) Sales person will intimate Investor the checklist of documents required to open
Trading Account & ask him to be ready with those documents.
3) The sales person will fill up the KYC application form of the investor he will
capture the images of the documents, signature, photo of the Investor on digital
device. Ref number will be sent to the Investor through SMS & email.
4) After the Backend KYC Validations Investors trading account will be generated &
intimation will be send to customer.
ANNEXURE- B
Factors detrimental to the growth of Stock options for hedging and investing
Introduction
The Indian options market is touted as a very large, liquid options market. The reality however is
that the Indian options market is extremely skewed with a vast majority of the liquidity and
volumes only in NIFTY options. The single stock options market remains without depth and
liquidity and has not grown as would be expected from a mature market.
Stock options are a very important tool for both investment and portfolio hedging and are
actively used by investors and market participants globally. Access to stock options enables
investors to mitigate stock specific risk as opposed to simply broad market systematic risk by
the use of Index options.
This paper discusses the factors that partially attributed to lack of growth of stock options in
India and offers suggestions on change.
Margining of options in India
Dr. L.C Gupta Committee had recommended that the level of initial margin required on a
position should be related to the risk of loss on the position. The concept of value-at-risk should
be used in calculating required level of initial margins. The recommendations of the Dr. L.C
Gupta Committee have been a guiding principle for SEBI in prescribing the margin computation
& collection methodology to the Exchanges. The margining methodology specified is consistent
with the margining system used in developed financial & commodity derivative markets
worldwide.
A portfolio based margining approach which takes an integrated view of the risk involved in the
portfolio of each individual client comprising of his positions in all Derivative Contracts i.e. Index
Futures, Index Option, Stock Options and Single Stock Futures, has been prescribed.
The worst scenario loss are required to be computed for a portfolio of a client and is calculated
by valuing the portfolio under 16 scenarios of probable changes in the value and the volatility of
the Index/ Individual Stocks. The options and futures positions in a client’s portfolio are required
to be valued by predicting the price and the volatility of the underlying over a specified horizon
so that 99% of times the price and volatility so predicted does not exceed the maximum and
minimum price or volatility scenario. In this manner initial margin of 99% VaR is achieved. The
specified horizon is dependent on the time of collection of mark to market margin by the
exchange.
The probable change in the price of the underlying over the specified horizon i.e. ‘price scan
range’, in the case of Index futures and Index option contracts are based on three standard
deviation (3σ ) where ‘σ ’ is the volatility estimate of the Index. In case of option and futures on
individual stocks the price scan range is based on three and a half standard deviation (3.5 σ)
where ‘σ’ is the daily volatility estimate of individual stock.
We highly endorse the portfolio risk approach to calculating margin requirements and laud the
regulators and exchanges for introducing the SPAN margining methodology in India.
In addition, for Index Futures and Stock futures it is specified that a minimum margin of 5% and
7.5% would be charged. This means if for stock futures the 3.5 σ value falls below 7.5% then a
minimum of 7.5% should be charged. This could be achieved by adjusting the price scan range.
In a portfolio of futures and options, the non-linear nature of options make short option positions
most risky. Especially, short deep out of the money options, which are highly susceptible to,
changes in prices of the underlying. Therefore a short option minimum charge has been
specified. The short option minimum charge is 3% and 7.5 % of the notional value of all short
Index option and stock option contracts respectively.
In the above guidelines, while the SPAN margin method captures the portfolio risk, the Short
option minimum charge specified, essentially renders the SPAN calculations redundant in a vast
majority of cases. This is due to the fact that the short option minimum levels have been set
extremely high.
Let us carefully examine the short option minimum levels from several angles:
- The minimum margin for Stock futures is 7.5% - which, as mentioned above, sets a minimum
3.5σ value, which makes sense. However if every short option position is also set at 7.5%, then
essentially every short option position is being treated as if It were a futures contract –
regardless of how out of the money or in the money the option is. The purpose of the short
option minimum, as clearly stated above, is to set some margin value for deep out of the money
options. By setting the short options minimum so high, it equates deep out of the options as
having the same risk as deep in the money options. This completely makes the SPAN
methodology redundant and thus is not following the original Dr. L.C Gupta Committee
recommendation that margining should be done based on risk of loss on the position by actually
valuing the positions under various scenarios.
- The short options minimum is inconsistent with Future margin requirements, thus leading to
incorrect overall portfolio margin, This, once again contradicts the Dr. L.C Gupta Committee
recommendation in which it is clearly stated that an integrated view of entire risk of a portfolio of
futures and options should be used.
- Hedged positions and options strategies are being penalized and charged far greater margin
than the risk of the position. This is best illustrated by a few examples:
Covered call position: Assume a long futures position against which an investor has sold a
slightly out of the money call option. The long futures position alone requires 7.5% margin.
However due to the short option minimum, the futures plus option combined position requires
15% margin. This is in spite the fact that the covered call position is no more risky than a simple
futures position – in fact it has slightly less risk. This would be seen clearly from any scenario.
Yet the margin required is double.
A Bull or Bear Spread. Assume a simple Bear spread on a stock like INFY, e.g. Investor Sells
3200 Call and Buys 3300 Call.
The absolute maximum risk of this position is Rs 100, or approx. 3%. Under no scenario can the
investor lose more than 3%. This is exactly what the SPAN risk simulations would show. Yet the
investor has to put up 7.5% margin for this position.
Now consider the Bull spread version – investor Buys 3200 Call and Sells 3300 Call for net cost
of Rs 25. Under no scenario can the investor lose more than the net premium of Rs 25, which is
0.80%. This is exactly what the SPAN risk simulations would show. Yet the investor has to put
up 7.5% margin for this position.
o A Conversion trade: A conversion is a fully riskless position E.g. Buy Stock Future, Sell Calls
and Buy Puts (of same strike). The position has no market risk whatsoever. This will clearly be
seen in the risk simulation of SPAN. Yet the holder of such a position has to put up a whopping
15% margin!
As is clear, the investor and trader is getting highly penalized by the short option minimum and
in all cases the short option minimum effectively overrides and renders the SPAN margin totally
redundant. In all these cases, the SPAN risk scenarios would correctly identify the risk, but the
short option minimum completely overrides it.
- Dr. L.C Gupta Committee states that the margining methodology specified is consistent with
the margining system used in developed financial & commodity derivative markets worldwide.
However the setting of such a high short option minimum actually makes this statement untrue,
as the in a vast majority of positions, the risk based margin calculations are being tossed aside.
This can also be seen from comparing the short option minimum from other exchanges around
the world where SPAN margin system is being used:
Exchange Product SOM (in %)*
NYSE Liffe Equity options 0.20%
ICE Futures Commodity futures options
1.00%
CME Gold Gold futures options
0.04%
CME Energy Energy futures options
0.06%
HKEX HIS HIS Index options 1.20%
ASX Equity options 0.02%
TAIFEX Equities Equity options 0.02%
TAIFEX GOLD Gold futures options
0.02%
OCC* US Equity Options 0.75%
*Note: in all of the exchanges the SOM is a fixed value per contract. The percentage is
calculated using an average price for the stock or commodity. The OCC uses TIMS, not SPAN,
but it is similar in approach.
As is clear, in all implementation of portfolio risk based margining globally, the SOM is a
relatively small number, keeping in line with the purpose of it providing a small minimum margin
for deep out of the money options.
The excessive Short option minimum is thus a huge impediment to the increased use of options
by investors. The margin requirement can easily exceed the actual risk and in some cases
exceed the worst case possible risk of a portfolio.
Recommendation
Our recommendation for the Short option minimum is as follows:
- Reduce the SOM to 1% for indices and 2% for stock options. While still high, this will at least
bring it in line.
- The current Dr. L.C Gupta Committee recommendation states: “In addition, for Index Futures
and Stock futures it is specified that a minimum margin of 5% and 7.5% would be charged. This
means if for stock futures the 3.5 σ value falls below 7.5% then a minimum of 7.5% should be
charged. This could be achieved by adjusting the price scan range”
We recommend that this be revised to: For Index Futures AND OPTIONS, the minimum price
scan range should be 5%, thus if the 3.5 σ value falls below 5%, then 5% should be used. For
Stock Futures AND OPTIONS, the minimum price scan range should be 7.5%, thus if the 3.5 σ
value falls below 7.5%, then 7.5% should be used.
This will make the calculation of risk consistent for futures and options. We believe that the
original intent of the committee was to set the minimum price scans for options to 5%/7.5%
respectively in order to capture the risk of deep out of the money options, as opposed to setting
those as the margin rate based on notional.
ANNEXURE- C
Trading Terminals and Approved Users
Regulation: As per extant SEBI regulations, the trading terminals can be installed only at the broker’s head office, branch office, sub broker or authorized person’s office. The physical location details of the trading terminal should be intimated through the interface provided by the exchanges.
Background: Most of the trading terminals used across the country today use the Intermediate Message Layer (IML) or the Computer to Computer Link (CTCL) by which brokers can use their own trading front–end software in order to trade. Due to the expansion of the branch and franchisee network across the country the exchanges allowed brokers to set up their own network of trading terminals where the broker’s server is connected to the server of the exchange through Internet/ Leaseline / VSAT.
Details of contravention: Location of terminal at a place other than the main / branch office and the offices of the registered sub brokers/ authorized persons of the member will attract a financial penalty of Rs.50000/ - per terminal.
Connectivity:
1. Internet is, by far, the preferred mode of connectivity across most sub broker terminals because of the minimal infrastructure requirements and low costs of setting up an internet based trading terminal. Terminals which are connected on the internet have a dynamic IP address unlike a leased line or VSAT connection which has a static IP. Though Sub Brokers and Authorised persons register their address at the time of registration , use of internet data cards / wi-fi connections from alternate locations( other than their registered address) such as home or other work place, is a reality because Internet connectivity cannot be restricted to a fixed location. Leased line and VSAT connectivity is not a feasible option for sub brokers/ authorised persons as they are very expensive and require significant enhancement in office infrastructure.
2. Additionally, ISP service providers such as BSNL, MTNL, and the private ISP players etc are not willing to provide fixed IP address for so many trading terminals across the country, even at a cost. The Broker is severely constrained in setting up any central mechanism to monitor and control the log in of trading terminals from a location that can only be the registered address of the terminal reported to the Exchange.
3. It is pertinent to note that Internet based trading terminal provided directly by NSE called NOW, also does not have any control mechanism to restrict the physical location from where the trading terminal is used.
Recommendation: It will not be feasible for the Broker to check this compliance from a central location as the dynamic IP address of all such trading terminals will not allow any central monitoring of the physical address of such internet connected trading terminals. Periodic onsite audits covering 10 % of the active sub brokers/ authorized persons will continue as is done today but it can never ensure 100% assurance with this compliance requirement which was relevant when connectivity was based on leased lines/ VSAT. In the era of Internet, this
requirement may no longer be relevant or practically feasible. Hence, we recommend this requirement should be done away with.
Additional Points SLBM Fees:
The Income tax has added all the Borrowing Fees paid to NSCCL by clients in the SLBM Segment
since no TDS was deducte .There is no clarity as to under which section it is to be paid and deduction
for which recipient. We do not know the end beneficiary since the sum is disbursed by the clearing
house to the lenders of stock.
SLBM Collateral:
Though SEBI has permitted to give approved stocks as collateral in the SLBM segment, exchanges
are not implementing the circular. This involves higher cash deployment of the client who borrows the
shares.
Adjustment of SLBM shares against short delivery in regular settlement:
The settlement of SLBM shares payout be done before pay in time of regular settlements so that
shares can be delivered against the members obligation. Currently, it is happening after pay in time.
Daily Margin Statement:
The Daily Margin statement introduced in 2008 in cash segment has become redundant since it only
indicates the Var and ELM Margin, which no client pays. It normally reaches the client after the
settlement of Funds and stocks has been done.
Monthly Funding Statement:
The Monthly Funding statement introduced in 2004 needs to be done away with since Stock
exchanges have permitted to keep Brokers to keep outstanding for 5 days and this amounts to
temporary funding by default . Hence, there is no need to give a report to stock exchange to indicate
peak funding of the broker during the month.
Multiple Client Bank Accounts for different segments and Exchanges:
Exchanges have to be brought along on the concept of one Client Bank Account for all segments .The
need for different Pool Account for CDSL and NSDL will remain since not all scrip’s are available on
both the depositories since many companies have offered demat of their shares either with a single
depository or both. Moreover with the common contract note, the clients will always give one cheque
and will not be exchange or segment centric.
Impact of Taxes and Treatment of Gains and Losses on new Products :
Before any product is introduced by the exchange, the tax effect of the same should be made clear.
Tax would involve Service tax, TDS , Stamp Duty and treatment of Income as per IT Act ,Even today,
the State Government are clueless about Stamp Duty for currency Turnover (even BOISL portal does
not show turnover of currency segment ).
Budget relief under Sec 73:
There is confusion of exemption available in the recent Budget under Sec 73 . The clause says that it
is available for Companies having Income from Investments to those whose principal Business is
Investments. The Exchange and SEBI should jointly make representation to Finance Ministry that it is
available to Stock Brokers.
Alerts on Order spoofing:
The Exchange needs to curtail the alerts on order spoofing (this forms the bulk of the alerts) as clients
will always put to buy or sell at lower rate away from the market price. Alerts should only be generated
if orders are put beyond 20% of the Last Traded Price.
Annexure of Contract Note with weighted average Prices:
The Contract Note can be sent with weighted average price of all trades for single scrip. In addition to
this, a detailed annexure of all the trades have to be sent to the clients defeating the purpose of the
consolidated trades contract note . It is suggested to keep the details of the trades on the web site of
the Broker under respective client login or allowed to be sent in E Mail even though the Customer has
not opted for a Digital contract but has provided a E Mail ID.
AP Cancellation Process:
The AP Cancellation Process involves a declaration that no case or complaint is pending against the
AP. A Broker's information is limited to the complaints received by him or any pending Arbitration
issues. The wordings involve the declaration for cases which may be filed at local level for which the
Broker is not made a party and not aware of. The declaration should therefore specifically use the
words "with the Broker”.
Permitting non defaulting clients to participate in Auction Process :
Currently, even if one share of any scrip remains undelivered , the clients of the broker are not
permitted to participate in Auction . This should be done away with and clients should be allowed to
participate in the Auction process.
Model Policies:
The exchange should put up Model Policies on the Web site which the Members can adopt and
should be treated as deemed compliant by the Exchange during Inspection.
Quarterly Payout of Securities:
Shares kept with Exchanges or Professional Clearing Members should be allowed to be delivered to
clients within 2 days of the Payout Cut off date. These shares once identified to be returned to client
needs to be called from the exchange or the PCM which involves at least 2 working days. Shares
lying in Margin and Beneficiary Account can be delivered on next working day or on same day.
Currently, the view taken is that all payout has to happen on same day, which is not feasible for such
scenarios.