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Stock exchanges and clearing corporations are now required to submit background and related information to establish that their shareholders/promoters are fit and proper persons
Mumbai: Market regulator Securities and Exchange Board of India (SEBI) announced exhaustive instructions related to ownership and governance for stock exchanges and clearing corporations, a move aimed to promote their effective and transparent functioning, reports PTI.
Stock exchanges and clearing corporations are now required to submit background and related information to establish that their shareholders/promoters are "fit and proper persons", among others.
Entities seeking recognition to operate as a bourse or clearing corporation need to submit various information, including business feasibility plan for the next five years, financial statements and bank account details, to SEBI.
A key element in execution of orders on exchanges, clearing corporations work with bourses to handle confirmation, delivery and settlement of transactions.
In a circular, market regulator SEBI said the applicant should provide satisfactory information regarding appointment of heads of key departments such as legal, listing, member registration, trading and surveillance in case of a stock exchange.
Once the recognition is granted, stock exchanges can commence operations with a minimum of 50 trading members while there should be at least 25 clearing members to start a clearing corporation.
Those exchanges and clearing corporation having a networth of less than Rs100 crore and Rs300 crore, respectively, at the time of commencement, have to submit plans -- within 90 days -- for achieving minimum threshold networth levels. These plans have to be approved by respective shareholders.
Outlining instructions for executive compensation at stock exchanges and clearing corporations, SEBI said variable pay component would not exceed one-third of total amount and 50% of the variable pay would be paid on a deferred basis after three years.
As per SEBI, employees stock options plan (ESOP) and other equity linked instruments would not form part of the compensation for the key management personnel.
Before giving compensation, entities are required to consider their financial conditions such as net profit and revenues.
Among others, SEBI has directed stock exchanges not to execute orders exceeding Rs10 crore in the normal market
Mumbai: To prevent instances of flash crashes on stock exchanges, Securities and Exchange Board of India (SEBI) came out with stringent norms that require bourses to ensure that brokers implement appropriate risk checks before executing a trade, reports PTI.
"... it has been decided to prescribe a framework of dynamic trade based price checks to prevent aberrant orders or uncontrolled trades," SEBI said in a circular.
The measures come more than two months after a massive 900-point flash-crash of the benchmark stock index Nifty, wiped out nearly Rs10 lakh crore of investor wealth. The flash crash, that happened on 5th October, had halted trading for about 15 minutes.
Among others, SEBI has directed stock exchanges not to execute orders exceeding Rs10 crore in the normal market.
These orders include ones placed on stocks, exchange traded funds (ETFs), index futures and stock futures.
In addition, exchanges have to ensure that appropriate checks for value are implemented by the stock brokers based on the respective risk profile of their clients.
"These measures would be implemented in phases in order to ensure the Indian stock exchanges deploy latest technology while maintaining adequate controls," the circular said.
All the measures are to be implemented within one month of the issuance of circular.