Circulars 2002

Depositories and Custodians
Derivatives
Mutual Funds Department
Primary Market Department
Secondary Market Department
Venture Capital Fund

DEPOSITORIES AND CUSTODIANS CIRCULARS 2002

Circular No. FITTC/FII/02/2002
May 15, 2002

All Foreign Institutional Investors and
Custodians of Securities

Dear Sir / Madam,

Sub: Reporting of write off of securities held by Foreign Institutional Investors and Sub-Accounts.

It has been brought to our notice that some of the Foreign Institutional Investors (FIIs) have been writing off securities held by them or their Sub-Accounts (SAs) due to various reasons. It has been decided that the following procedure for writing off securities and reporting to SEBI may be adopted:

Securities may be written off with prior approval of FII.
Write off: Securities written off should be reported to SEBI as sale with nil value/ compensation received from broker / stock exchange / bank / company etc.
Write back: If securities previously reported as written off are subsequently received by the custodian the same should be reported to SEBI as purchase. Prior permission of RBI is to be obtained before reporting the purchase.
Disinvestment: In case a custodian is unable to deliver the securities or ascertain the claimant for the securities that are received subsequent to write off due to any unforeseen circumstances viz. FII/SA no longer existing/operating or expiry of SEBI registration/FEMA approval, etc., the following steps may be taken :

sell these securities through stock exchange and proceeds thereof net of expenses shall be credited to the Investors Protection Fund of the regional stock exchange of the company not later than 7 days from the date of receipt thereof.
the aforesaid sale transaction should be reported to SEBI as a normal sale.
Confirmation in this regard shall be submitted to SEBI on a monthly basis by means of a letter to be submitted by 7^th of the following month.

Custodians should note that they are acting as trustees and shall not derive any extra benefit from the disinvestment of securities other than their charges/fees. 5. Corporate benefits: In case of receipt of corporate benefits in the form of securities arising out of shares written off, the same shall be reported to SEBI in the normal manner. Similarly, corporate benefits received in the form of cash viz. dividend shall be credited to the Investors Protection Fund of the regional stock exchange not later than 7 days from the date of receipt of the same.

Custodians shall ensure that their agreements with clients contain necessary provisions for write-off as well as disinvestment and appropriation of proceeds thereof as cited above.

7. Reporting Procedure:

Write off: The write off of securities as stated at para 2 above shall be reported to SEBI as sale with nil value / compensation received from broker/exchange/bank/company under transaction code 17.
Write back: The write back shall be reported to SEBI as purchase in the account of the respective FII/SA under transaction code 18.
Disinvestment: Disinvestment as stated in para 4 above shall be reported as normal sale under transaction code 4.

Further, securities already written off by the FIIs/SAs should be reported vide a single report both in hard and soft copy by June 01, 2002.

These instructions are issued under regulation 20 of SEBI (Foreign Institutional Investors) Regulations, 1995 and shall come in force with effect from June 01, 2002.

The custodians are requested to bring the contents of this circular to the notice of their FII clients.

Yours faithfully,

P. Gupta
General Manager
FII DIVISION
FITTC DEPARTMENT
EMAIL: pgupta@sebi.gov.in
WEB-SITE:www.sebi.gov.in
FAX NO: 91 22 2845776

DEPUTY GENERAL MANAGER
DEPOSITORIES & CUSTODIAL DIVISION

D&CC/FITTC/CIR – 07/2002
April 08, 2002

To,
All Stock Exchanges and Depositories

Dear Sir,

DEPOSITORIES & CUSTODIAL DIVISION – CIRCULAR NO.7

In order to ensure smooth functioning of T+3 rolling settlement, it has been decided that the Depository Participants (DPs) shall execute Beneficiary Owner’s instructions received within 24 hours before pay-in time of the respective Stock Exchange. Any instructions received after such time may also be executed at the risk of Beneficiary Owner. The Depositories shall communicate the same to DPs and report compliance to SEBI.

The instructions will come into force with immediate effect.

Yours faithfully,

G.S. REDDY

FEBRUARY 2002

February 04, 2002

DEPUTY GENERAL MANAGER
DEPOSITORIES AND CUSTODIAN DIVISION

D&CC/FITTC/CIR – 06/2002
January 31, 2002

To,

All Stock Exchanges and Depositories

Dear Sir,

Please refer to circular no. D&CC/FITTC/CIR-05/2001 dated December 26, 2001 regarding the list of scrips, which shall trade under the normal rolling settlement mode of the stock exchanges.

The Depositories have informed us that some of the companies given in annexure ‘A’ (serial no. 01 to 08) had established connectivity with them before October 31, 2001, the correct status of which was not furnished to SEBI. It was therefore decided that these scrips shall trade in the normal rolling settlement mode of the stock exchanges with immediate effect.

As per the information provided by both the depositories the list of scrips that have established connectivity with them as on December 31, 2001 is given in annexure ‘A’ (serial no. 09 to 91). These scrips would be traded in the normal rolling settlement mode with effect from March 31, 2002.

Yours faithfully,

G S REDDY

Annexure ‘A’

S.No	Company Name
FOR TRADING UNDER NORMAL ROLLING SETTLEMENT FROM JANUARY 31, 2002
	Akar Laminators Limited
	Bajaj Tempo Limited
	Hitkari China Limited
	Monozyme India Limied
	Polar Pharma India Limited (formerly Polar Latex Limited)
	Tata Coffee Limited (formerly Consolidated Coffee Ltd)
	The Rai Saheb Rekhchand Mohata Spinning and Weaving Mills Ltd
	TSL Industries Limited
FOR TRADING UNDER NORMAL ROLLING SETTLEMENT FROM MARCH 31, 2002
	Anglo-French Drugs & Industries Ltd
	Arihant Ltd
	Arunoday Mills Ltd.
	Ask Financial Services Ltd.
	Associated Pigments Ltd
	Associated Transrail Structures Ltd.
	Betala Global Securities Ltd
	Bhaktwatsal Investments Ltd
	Bhandari Hosiery Exports Ltd.
	Bhilwara Holdings Ltd.
	Bigoo Investments Ltd.
	Birla Capital & Financial Services Ltd (formerly, Dolphin International Ltd)
	Birla Kennametal Ltd
	Carbon Specialities Ltd
	Chemcaps Ltd.
	Classique Trade Holdings Ltd
	Coral India Finance and Housing Ltd.
	Coral Laboratories Ltd
	Datt Mediproducts Ltd
	Dazzel Confindive Ltd
	Delta Paper Mills Ltd.
	Denison Hydraulics India Ltd
	Express Leasing Ltd
	Finalysis Credit & Guarantee Co Ltd.
	Focus Industrial Resources Ltd.
	GDL Leasing & Finance Ltd
	Gemini Tradelinks Ltd
	Globe Soya Products Ltd.
	Graceful Properties Ltd
	Gruh Finance Limited
	Hasimara Industries Ltd.
	Hercules Hoists Ltd
	Himatsingka Auto Enterprises Ltd
	Hiran Orgochem Ltd
	Incon Engineers Ltd
	India Motor Parts & Accessories Ltd
	Indian Wood Products Company Ltd
	Inox Leasing and Finance Ltd.
	Integra Hindustan Control Ltd
	Investment & Precision Castings Ltd.
	Jupiter Biotech Ltd (formerly, Gujarat Vita Pharma Ltd)
	Kanpur Plastipack Ltd
	Katwa Udyog Ltd
	Keswani Synthetics Industries Ltd.
	Madhucon Projects Ltd
	Minal Engineering Ltd.
	Monnet Industries Ltd.
	Munoth Investments Ltd
	Nakoda Textile Industries Ltd
	Paco Exports Ltd.
	Permanent Magnets Ltd.
	Poddar Heritage Investments Ltd
	Prajeev Investments Ltd.
	Prashant Investments Ltd.
	Precision Paper Industries Ltd
	Premier Auto Finance Ltd
	Premier Tyres Ltd
	Priya International Ltd.
	PSTS Heavy Lift & Shift Ltd (formerly, PSTS Heavy Equipments Ltd)
	Rajapalayam Mills Ltd.
	Rathi Mercantile Industries Ltd
	Reliance Commercial Company Ltd.
	Riverdale Foods LTD.
	Rochees Breweries Ltd.
	Roopacherra Tea Company Ltd.
	Rose Merc Ltd (formerly Rose Patel Mercantile Company Ltd)
	Ruby Traders & Exporters Ltd
	Salona Cotspin Ltd.
	Seymour Technologies Ltd
	Shalimar Agencies Ltd.
	Shauma Vanijya Pratisthan Ltd.
	Sidh Leasing Ltd.
	Smruthi Organics Ltd.
	Softrak Venture Investment Ltd
	Spencer and Company Ltd.
	Sri Vasavi Industries Ltd
	Sumeet Industries Ltd (formerly, Sumeet Synthetics Ltd)
	Surya India Ltd.
	The Ramaraju Surgical Cotton Mills Ltd.
	Tulsyan NEC Ltd.
	Twenty First Century (India) Ltd
	U P Hotels Ltd
	Vadilal EnterprisesLtd.

Annexure ‘A’

S.No	Company Name
FOR TRADING UNDER NORMAL ROLLING SETTLEMENT FROM JANUARY 31, 2002
	Akar Laminators Limited
	Bajaj Tempo Limited
	Hitkari China Limited
	Monozyme India Limied
	Polar Pharma India Limited (formerly Polar Latex Limited)
	Tata Coffee Limited (formerly Consolidated Coffee Ltd)
	The Rai Saheb Rekhchand Mohata Spinning and Weaving Mills Ltd
	TSL Industries Limited
FOR TRADING UNDER NORMAL ROLLING SETTLEMENT FROM MARCH 31, 2002
	Anglo-French Drugs & Industries Ltd
	Arihant Ltd
	Arunoday Mills Ltd.
	Ask Financial Services Ltd.
	Associated Pigments Ltd
	Associated Transrail Structures Ltd.
	Betala Global Securities Ltd
	Bhaktwatsal Investments Ltd
	Bhandari Hosiery Exports Ltd.
	Bhilwara Holdings Ltd.
	Bigoo Investments Ltd.
	Birla Capital & Financial Services Ltd (formerly, Dolphin International Ltd)
	Birla Kennametal Ltd
	Carbon Specialities Ltd
	Chemcaps Ltd.
	Classique Trade Holdings Ltd
	Coral India Finance and Housing Ltd.
	Coral Laboratories Ltd
	Datt Mediproducts Ltd
	Dazzel Confindive Ltd
	Delta Paper Mills Ltd.
	Denison Hydraulics India Ltd
	Express Leasing Ltd
	Finalysis Credit & Guarantee Co Ltd.
	Focus Industrial Resources Ltd.
	GDL Leasing & Finance Ltd
	Gemini Tradelinks Ltd
	Globe Soya Products Ltd.
	Graceful Properties Ltd
	Gruh Finance Limited
	Hasimara Industries Ltd.
	Hercules Hoists Ltd
	Himatsingka Auto Enterprises Ltd
	Hiran Orgochem Ltd
	Incon Engineers Ltd
	India Motor Parts & Accessories Ltd
	Indian Wood Products Company Ltd
	Inox Leasing and Finance Ltd.
	Integra Hindustan Control Ltd
	Investment & Precision Castings Ltd.
	Jupiter Biotech Ltd (formerly, Gujarat Vita Pharma Ltd)
	Kanpur Plastipack Ltd
	Katwa Udyog Ltd
	Keswani Synthetics Industries Ltd.
	Madhucon Projects Ltd
	Minal Engineering Ltd.
	Monnet Industries Ltd.
	Munoth Investments Ltd
	Nakoda Textile Industries Ltd
	Paco Exports Ltd.
	Permanent Magnets Ltd.
	Poddar Heritage Investments Ltd
	Prajeev Investments Ltd.
	Prashant Investments Ltd.
	Precision Paper Industries Ltd
	Premier Auto Finance Ltd
	Premier Tyres Ltd
	Priya International Ltd.
	PSTS Heavy Lift & Shift Ltd (formerly, PSTS Heavy Equipments Ltd)
	Rajapalayam Mills Ltd.
	Rathi Mercantile Industries Ltd
	Reliance Commercial Company Ltd.
	Riverdale Foods LTD.
	Rochees Breweries Ltd.
	Roopacherra Tea Company Ltd.
	Rose Merc Ltd (formerly Rose Patel Mercantile Company Ltd)
	Ruby Traders & Exporters Ltd
	Salona Cotspin Ltd.
	Seymour Technologies Ltd
	Shalimar Agencies Ltd.
	Shauma Vanijya Pratisthan Ltd.
	Sidh Leasing Ltd.
	Smruthi Organics Ltd.
	Softrak Venture Investment Ltd
	Spencer and Company Ltd.
	Sri Vasavi Industries Ltd
	Sumeet Industries Ltd (formerly, Sumeet Synthetics Ltd)
	Surya India Ltd.
	The Ramaraju Surgical Cotton Mills Ltd.
	Tulsyan NEC Ltd.
	Twenty First Century (India) Ltd
	U P Hotels Ltd
	Vadilal EnterprisesLtd.

DEPOSITORIES AND CUSTODIANS 2001

December 2001

December 26, 2001

November 2001

November 13, 2001

October 2001

October 15, 2001

August 2001

August 3, 2001

DEPOSITORIES AND CUSTODIANS 2001

DERIVATIVES

GENERAL MANAGER
SECONDARY MARKET DEPARTMENT

SMD/DC/Cir-12/02
May 13, 2002

The Chief Executive Officers of
Derivatives Segment of BSE and its Clearing House and
The F&O Segment of NSE and its Clearing Corporation

Re: Format of the Monthly Reporting Format

Dear Sir,

The format of the Monthly Activity Report (MAR) is enclosed in Annexure A for the trading and settlement activities for the Derivatives / F&O segment at the exchange.

You are requested to submit the MAR as per the enclosed format from the month of May 2002 onwards latest by the 7^th of the following month.

Yours sincerely,

P. K. BINDLISH

Encl. Format of Monthly Activity Report for the Derivatives / F&O Segment

MONTHLY ACTIVITY REPORT

TABLE OF CONTENTS

I) TRADING STATISTICS: 1) Summary of trading in Derivatives for the year

2) Trading Statistics for the month of ---------------------------

3) Cash market total volumes (in Rs. crores) during the month and comparison of the same with the derivative market volumes (in Rs. crores) during the month, in percentage.

4) Comparison of volumes in Futures vis a vis Options during the month.

5) Volume contribution from various participants in the market:

6) Comparison of Volumes in the derivatives market with the volumes in the underlying market during the month ______________________

II) PRICE SCANNING RANGE DURING THE PREVIOUS MONTH:

III) COMPLIANCE OF THE ELIGIBILITY CRITERIA OF THE STOCKS ON WHICH FUTURES AND OPTIONS ARE TRADED:

IV) MEMBER AND FII REGISTRATION DETAILS:

V) INSPECTIONS CONDUCTED:

VI) INVESTOR EDUCATION PROGRAMS:

VII) CERTIFICATION PROGRAMS:

VIII) INVESTOR COMPLAINTS IN THE DERIVATIVES SEGMENT:

IX) ARBITRATION IN THE DERIVATIVES SEGMENT:

TRADING STATISTICS:
1. Summary of trading in Derivatives for the year ----------


Month	Index Futures		Index Options		Stock Options		Single Stock Futures		Total Trading
	No. of Contracts	Value of contracts	No. of Contracts	Value of contracts	No. of Contracts	Value of contracts	No. of Contracts	Value of contracts	No. of Contracts	Value of contracts
Apr-01
May-01
Jun-01
Jul-01
Aug-01
Sep-01
Oct-01
Nov-01
Dec-01
Jan-02
Feb-02
Mar-02
Apr-02
May-02

Trading Statistics for the month of ---------------------------


Type of Derivative Contract		Number of Trades	Total No. of contracts Traded	Total Value of Contracts Traded (Rs. Crores)	Average No. of contracts traded	Average Trading Value in Rs. crores	Average Open Interest (No. of Contracts)	Average Value of Open Interest (Rs. Crores)	Total no. of contracts assigned		Total Value of contracts assigned / expired (in Rs. crores)
									Interim Assignments	Final Assignments / Expiry
Index Futures Contracts
Index Option Contracts
Stock Option Contracts
Associated Cement Co Ltd.	Calls
Associated Cement Co Ltd.	Puts
Associated Cement Co Ltd.	Futures
Bajaj Auto Ltd.	Calls
Bajaj Auto Ltd.	Puts
Bajaj Auto Ltd	Futures
Bharat Petroleum Corp	Calls
Bharat Petroleum Corp	Puts
Bharat Petroleum Corp	Futures
BHEL	Calls
BHEL	Puts
BHEL	Futures
BSES Ltd.	Calls
BSES Ltd.	Puts
BSES Ltd.	Futures
Cipla Ltd.	Calls
Cipla Ltd.	Puts
Cipla Ltd.	Futures
Digital Equipment (I) Ltd.	Calls
Digital Equipment (I) Ltd.	Puts
Digital Equipment (I) Ltd.	Futures
Dr.Reddy’s Laboratories	Calls
Dr.Reddy’s Laboratories	Puts
Dr.Reddy’s Laboratories	Futures
Grasim Industries Ltd.	Calls
Grasim Industries Ltd.	Puts
Grasim Industries Ltd.	Futures
Gujarat Ambuja Cement Ltd.	Calls
Gujarat Ambuja Cement Ltd.	Puts
Gujarat Ambuja Cement Ltd.	Futures
Hindustan Lever Ltd.	Calls
Hindustan Lever Ltd.	Puts
Hindustan Lever Ltd.	Futures
Hindustan Petroleum Corp	Calls
Hindustan Petroleum Corp	Puts
Hindustan Petroleum Corp	Futures
Hindalco Industries Ltd.	Calls
Hindalco Industries Ltd.	Puts
Hindalco Industries Ltd.	Futures
HDFC Ltd.	Calls
HDFC Ltd.	Puts
HDFC Ltd.	Futures
ICICI Ltd.	Calls
ICICI Ltd.	Puts
ICICI Ltd.	Futures
Infosys Technologies Ltd.	Calls
Infosys Technologies Ltd.	Puts
Infosys Technologies Ltd	Futures
ITC Ltd.	Calls
ITC Ltd.	Puts
ITC Ltd.	Futures
Larsen & Toubro Ltd.	Calls
Larsen & Toubro Ltd.	Puts
Larsen & Toubro Ltd	Futures
Mahindra & Mahindra Ltd.	Calls
Mahindra & Mahindra Ltd.	Puts
Mahindra & Mahindra Ltd.	Futures
MTNL Ltd.	Calls
MTNL Ltd.	Puts
MTNL Ltd.	Futures
Ranbaxy Labs Ltd.	Calls
Ranbaxy Labs Ltd.	Puts
Ranbaxy Labs Ltd	Futures
Reliance Petroleum Ltd.	Calls
Reliance Petroleum Ltd.	Puts
Reliance Petroleum Ltd.	Futures
Reliance Industries Ltd.	Calls
Reliance Industries Ltd.	Puts
Reliance Industries Ltd	Futures
Satyam Computer Services	Calls
Satyam Computer Services	Puts
Satyam Computer Services	Futures
State Bank Of India	Calls
State Bank Of India	Puts
State Bank Of India	Futures
Sterlite Optical Technology	Calls
Sterlite Optical Technology	Puts
Sterlite Optical Technology	Futures
Telco Ltd.	Calls
Telco Ltd.	Puts
Telco Ltd	Futures
Tata Power Co. Ltd.	Calls
Tata Power Co. Ltd.	Puts
Tata Power Co. Ltd	Futures
Tisco Ltd.	Calls
Tisco Ltd.	Puts
Tisco Ltd.	Futures
Tata Tea Ltd.	Calls
Tata Tea Ltd.	Puts
Tata Tea Ltd	Futures
Videsh Sanchar Nigam Ltd.	Calls
Videsh Sanchar Nigam Ltd.	Puts
Videsh Sanchar Nigam Ltd	Futures

Cash market total volumes (in Rs. crores) during the month and comparison of the same with the derivative market volumes (in Rs. crores) during the month, in percentage.

Comparison of volumes in Futures vis a vis Options during the month.
volume contribution from various participants in the market:


Particulars	Index Futures		Index Options		Stock Options		Single Stock Futures
	In Rs. crores	In % of total	In Rs. crores	In % of total	In Rs. crores	In % of total	In Rs. crores	In % of total
Client Trading
Proprietary Trading
FII Trading

Comparison of Volumes in the derivatives market with the volumes in the underlying market during the month ______________________


Particulars	Monthly Volumes in futures (in Rs. crores)	Monthly Volumes in Options (in Rs. crores)	Total Monthly Volumes in the Derivatives Market ( in Rs. crores)	Total Monthly Volumes in underlying (in Rs. crores)	Futures and Option volumes Vs. cash market volume (%)
Associated Cement Co Ltd.
Bajaj Auto Ltd.
Bharat Petroleum Corp
BHEL
BSES Ltd.
Cipla Ltd.
Digital Equipment (I) Ltd.
Dr.Reddy’s Laboratories
Grasim Industries Ltd.
Gujarat Ambuja Cement Ltd.
Hindustan Lever Ltd.
Hindustan Petroleum Corp
Hindalco Industries Ltd.
HDFC Ltd.
ICICI Ltd.
Infosys Technologies Ltd.
ITC Ltd.
Larsen & Toubro Ltd.
Mahindra & Mahindra Ltd.
MTNL Ltd.
Ranbaxy Labs Ltd.
Reliance Petroleum Ltd.
Reliance Industries Ltd.
Satyam Computer Services
State Bank Of India
Sterlite Optical Technology
Telco Ltd.
Tata Power Co. Ltd.
Tisco Ltd.
Tata Tea Ltd.
Videsh Sanchar Nigam Ltd.

PRICE SCANNING RANGE DURING THE PREVIOUS MONTH:


Name of the underlying	Average scanning range (in % terms)	Maximum scanning range (in % terms)	Minimum scanning range (in % terms)
Index
Associated Cement Co Ltd.
Bajaj Auto Ltd.
Bharat Petroleum Corp
BHEL
BSES Ltd.
Cipla Ltd.
Digital Equipment (I) Ltd.
Dr.Reddy’s Laboratories
Grasim Industries Ltd.
Gujarat Ambuja Cement Ltd.
Hindustan Lever Ltd.
Hindustan Petroleum Corp
Hindalco Industries Ltd.
HDFC Ltd.
ICICI Ltd.
Infosys Technologies Ltd.
ITC Ltd.
Larsen & Toubro Ltd.
Mahindra & Mahindra Ltd.
MTNL Ltd.
Ranbaxy Labs Ltd.
Reliance Petroleum Ltd.
Reliance Industries Ltd.
Satyam Computer Services
State Bank Of India
Sterlite Optical Technology
Telco Ltd.
Tata Power Co. Ltd.
Tisco Ltd.
Tata Tea Ltd.
Videsh Sanchar Nigam Ltd.

COMPLIANCE OF THE ELIGIBILITY CRITERIA OF THE STOCKS ON WHICH FUTURES AND OPTIONS ARE TRADED:


Name of the stock	Maximum Volatility < 4 times the Index Volatility	Non-Promoter Holding > 30%	Trading Frequency > 90% in last 6 months	Free Float Market Capitalisation > Rs. 750 crores	Average Daily traded volume in the underlying market > Rs. 5 crores	All Criteria applied together
Associated Cement Co Ltd.
Bajaj Auto Ltd.
Bharat Petroleum Corp
BHEL
BSES Ltd.
Cipla Ltd.
Digital Equipment (I) Ltd.
Dr.Reddy’s Laboratories
Grasim Industries Ltd.
Gujarat Ambuja Cement Ltd.
Hindustan Lever Ltd.
Hindustan Petroleum Corp
Hindalco Industries Ltd.
HDFC Ltd.
ICICI Ltd.
Infosys Technologies Ltd.
ITC Ltd.
Larsen & Toubro Ltd.
Mahindra & Mahindra Ltd.
MTNL Ltd.
Ranbaxy Labs Ltd.
Reliance Petroleum Ltd.
Reliance Industries Ltd.
Satyam Computer Services
State Bank Of India
Sterlite Optical Technology
Telco Ltd.
Tata Power Co. Ltd.
Tisco Ltd.
Tata Tea Ltd.
Videsh Sanchar Nigam Ltd.

MEMBER AND FII REGISTRATION DETAILS:

Comments on volume contribution by various class of Traders/Investors:

INSPECTIONS CONDUCTED:


Member type	No. Registered	No. Inspected during the month	Total Inspected during the year
Trading Members
Trading cum Clearing Members
Self Trading cum Clearing Members
Professional Clearing Members

INVESTOR EDUCATION PROGRAMS:


Region	No. of Investor Education Programs held upto previous month in the year	No. of Investor Education Programs held during the month	Total Investor Education Programs conducted in the year
Northern Region
Southern Region
Western Region
Eastern Region

CERTIFICATION PROGRAMS:


Month	No.certified at the end of the previous month	No. Certified during the month	Total no. Certified

INVESTOR COMPLAINTS IN THE DERIVATIVES SEGMENT:


Pending at the beginning of the month	Received during the month	Resolved during the month	Pending at the end of the month

ARBITRATION IN THE DERIVATIVES SEGMENT:


Pending at the beginning of the month	Received during the month	Resolved during the month	Pending at the end of the month

FEBRUARY, 2002

February 12, 2002

N. PARAKH
CHIEF GENERAL MANAGER

SMD/DC/CIR-11/02
February 12, 2002

The Chief Executive Officer/ Managing Director
of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.

Re: Scheme of FII Trading in all Exchange Traded Derivative Contracts

Dear Sir,

RBI had vide circular EC.CO.FII/ /11.01.01(16)/2000-01 dated August 7, 2000 permitted Foreign Institutional Investors (FIIs) to trade in exchange traded index futures contracts on the Derivative Segment of BSE and the F & O Segment of NSE provided the overall open interest of the FII would not exceed 100% of market value of the concerned FII's total investment.

The SEBI Board vide meeting dated December 28, 2001 has permitted FIIs to trade in all exchange traded derivative contracts and laid down the position limits for the trading of FIIs and their sub-accounts. RBI vide circular ECO.CO.FII/515/11.01.01/(16) 2000-01 dated February 4, 2002 permitted FIIs to trade in all the exchange traded derivative contracts subject to the position limits prescribed hereunder. The FIIs shall be under obligation to adhere to the position limits prescribed for them and their sub-accounts. The FIIs shall also comply with the procedure for trading, settlement and reporting as prescribed by the derivative exchange / Clearing House / Clearing Corporation from time to time. The position limits for FII and their sub-accounts shall be as under:

I POSITION LIMITS

At the level of the FII

In the case of index related derivative products there shall be a position limit at the level of FII at 15% of the open interest of all derivative contracts on a particular underlying index or Rs. 100 crores whichever is higher, per exchange.

The FII position limit in derivative contracts on a particular underlying stock would be at 7.5% of the open interest of all derivative contracts on a particular underlying stock or Rs. 50 crores whichever is higher, at an exchange.

At the level of the sub-account

Each Sub-account of a FII would have the following position limits:

A disclosure requirement for any person or persons acting in concert who together own 15% or more of the open interest of all derivative contracts on a particular underlying index.

The gross open position across all derivative contracts on a particular underlying stock of a sub-account of a FII should not exceed the higher of:

1% of the free float market capitalisation (in terms of number of shares).

5% of the open interest in the derivative contracts on a particular underlying stock (in terms of number of contracts).

This position limits would be applicable on the combined position in all derivative contracts on an underlying stock at an exchange.

The Derivative Segment of the Exchanges and their Clearing House / Clearing Corporation would monitor the FII position limits at the end of each trading day. For this purpose, the Derivative Segment of the Exchanges and their Clearing House / Clearing Corporation would implement the following procedure for the monitoring of the FII and the sub-account's position limits:

The FII would be required to notify the names of the Clearing Member/s and Custodian through whom it would clear its derivative trades to exchanges and their Clearing House / Clearing Corporation.
A unique code would be assigned by the exchanges and / or the Clearing House / Clearing Corporation to each registered FII intending to trade in derivative contracts.
The FII would be required to confirm all its positions and the positions of all its sub-accounts to the designated Clearing Members online but before the end of each trading day.
The designated Clearing Member/s would at the end of each trading day would submit the details of all the confirmed FII trades to the derivative Segment of the exchange and their Clearing House / Clearing Corporation.
The exchanges and their Clearing House / Clearing Corporation would then compute the total FII trading exposure and would monitor the position limits at the end of each trading day. The cumulative FII position may be disclosed to the market on a T + 1 basis, before the commencement of trading on the next day.
In the event of an FII breaching the position limits on any derivative contract on an underlying, the FII would not be permitted by the exchanges and their Clearing House / Clearing Corporation / Clearing Member/s to take any fresh positions in any derivative contracts in that underlying. However, they would be permitted to execute off-setting transactions so as to reduce their open position.
The FIIs while trading for each sub-account would also assign a unique client code with a prefix or suffix of the code assigned by the exchange and their Clearing House / Clearing Corporation to the FII. The FII would be required to enter the unique sub-account code before executing a trade on behalf of the sub-account.
The sub-account position limits would be monitored by the FII itself, on the same lines as the trading member monitors the position limits of its client / customer. The FIIs would report any breach on position limits by the sub-account, to the derivative segment of the exchange and their Clearing House / Clearing Corporation and the FII / Custodian / Clearing Member/s would ensure that the sub-account does not take any fresh positions in any derivative contracts in that underlying. However the sub-account would be permitted to execute off-setting transactions so as to reduce its open position
The exchanges may assign unique sub-account codes on the lines of unique client codes to each sub-account of a FII, which would enable the derivative segment of the exchange and their Clearing House / Clearing Corporation to monitor the position limits specified for sub-accounts.

II COMPUTATION OF THE POSITION LIMITS

The position limits would be computed on a gross basis at the level of a FII and on a net basis at the level of sub-accounts and proprietary positions.

The open position for all derivative contracts would be valued as the open interest multiplied with the closing price of the respective underlying in the cash market.

Yours sincerely,

N. PARAKH

DERIVATIVES

November 2001

November 2, 2001

· Scheme for introduction of Single Stock Futures and the Risk Containment Measures

August 2001

August 24, 2001

· Reporting of derivative transactions to the media and the newspapers

June 2001

June 21, 2001

· Adjustment of Corporate Actions for Stock Option
June 20, 2001

· Risk containment measures for Stock Option

· Reporting of option contracts to SEBI.

CHIEF GENERAL MANAGER
DERIVATIVE CELL

SMDRP/DC/CIR- 10/01
November 2, 2001

To,
The Chief Executive Officer/ Managing Director
of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.

Dear Sir,

Sub: Scheme for introduction of Single Stock Futures and the Risk Containment Measures.

This is in continuation of SEBI Circular No. IES/DC/CIR-4/99 dated July 28, 1999, Circular No. IES/DC/CIR-5/00 dated December 11, 2000 and Circular No. SMD/DC/Cir-10/01 dated June 20, 2001 wherein the risk containment measures for Exchange traded Index Futures, Index Option, and Stock Option Contracts were laid down.

SEBI has setup an Advisory Committee on Derivatives headed by Prof. J. R Varma. The Advisory Committee had recommended the introduction of Single Stock Futures in the Indian Securities Market. SEBI Board in its meeting on September 4, 2001 considered the recommendation of the Advisory Committee on Derivatives and granted in-principle approval for the introduction of futures on 31 stocks, in which options contracts have been permitted by SEBI. Further, the Board desired that the Advisory Committee on Derivatives,

devise a detailed scheme for the introduction of this product,
specify the risk containment measures which could include cash settlement of Single stock futures, and
specify the time frame in which futures on Single stocks could be introduced after assessing the preparedness of the exchanges in terms of infrastructure.

On the risk containment measures the Advisory Committee on Derivatives agreed to adopt the existing risk management framework in the derivative market for Single Stock Futures. The committee asked SEBI to set various parameters like volatility estimates, price range, minimum margin level, calendar spread charges etc, in consultation with the exchanges.

The scheme of introduction and the risk containment measures for Single stock futures contracts framed in consultation with the stock exchanges, within the framework specified by the Advisory Committee on Derivatives, and approved by the SEBI Board in its meeting On November 1, 2001, are as follows-

The Single Stock Futures Contracts to be traded on the derivative exchange/segments shall have prior approval of SEBI. The Contract should comply with the disclosure requirements, if any, laid down by SEBI.
The Exchanges shall initially introduce Single Stock Futures Contract, which shall be settled in cash.
In order to maintain symmetry between Futures and Options Contract on the same underlying, the lot size of the option contract and the multiplier for the futures contract shall remain the same for the given underlying.
Single Stock Futures contract shall be permitted upto maximum maturity of 12 months. Initially, Single Stock Futures contract shall have maturity of three months and at the time of its introduction, three contracts of maturity of one-month, two-month and three-month would be introduced simultaneously. Therefore, at any point in time atleast three Single Stock Futures contracts on a particular underlying would be available for trading.
Any adjustments in contract specifications of Single Stock Futures Contract at the time of corporate actions would be in line with international best practices and the sub-committee on adjustment of corporate actions for Stock Options would decide on any such adjustments.
Eligibility of Stocks

The Board has approved the introduction of Single Stock Futures Contracts on 31 stocks on which option contracts have been introduced on BSE & NSE. The Advisory Committee on Derivatives shall review the eligibility criteria for introduction of futures and options on any other stock from time to time.

Risk Containment Measures

A portfolio based margining approach shall be adopted which will 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. The parameters for such a model should include the following-

initial margin or worst scenario loss

The Initial Margin requirements are based on worst scenario loss of a portfolio of an individual client to cover 99% VaR over one day horizon across various scenarios of price changes and volatility shifts. For Index products the price scan range is specified at three standard deviation (3 sigma) and the volatility scan range is specified at 4%. For stock option contracts the price scan range is specified at three and a half standard deviation (3.5 sigma) and the volatility scan range is specified at 10%. There is also a minimum margin requirement. For index futures contracts it is specified that in no case the initial margin shall be less than 5% of the value of the contract. For index options a short option minimum charge of 3% of the notional value of all short index option has been prescribed and in the case of stock option contracts, a short option minimum charge of 7.5% of the notional value of all short stock option contract has been prescribed.

In the case of Single Stock Futures, the initial margin would be computed as the worst scenario loss of a portfolio comprising of all the positions of a client in all the futures and options contracts. For Single Stock Futures the price scan range would be 3.5 Standard Deviation (3.5 sigma) and in no case the initial margin for Single Stock Futures contract shall be less than 7.5% of the value of the Single Stock Futures contract. The SPAN margining system, which has been adopted by both BSE & NSE, does not have the provision to provide for charging a minimum margin of 7.5% for futures contracts. However, in order to achieve the requirement of minimum margin for the Single Stock Futures contract, the price scan range would be adjusted so as to ensure that the initial margin for Single Stock Futures contracts does not fall below 7.5% in any scenario. The standard deviation would be calculated as per the methodology specified in the Prof. J. R Varma Committee Report on the Risk Containment Measures for Index Futures.

The Initial Margin requirement shall continue to be netted at level of individual client and shall be calculated on a gross basis at the level of Trading / Clearing Member. The Initial margin requirement for the proprietary position of Trading/Clearing member shall be calculated on a net basis

Calendar spread for the Single Stock Futures contract

On the introduction of option contracts, the margin on calendar spread is calculated on the basis of delta of the portfolio consisting of futures and option contract in each month. Thus, a portfolio consisting of a near month option with a delta of 100 and a far month option with a delta of –100 would bear a spread charge equal to the spread charge for a portfolio which is long 100 near month futures and short 100 far month futures. The Calendar Spread Margin is charged in addition to the Worst Scenario Loss of the portfolio. A calendar spread would be treated as a naked position in the far month contract as the near month contract approaches expiry. A calendar spread is treated as a naked position in the far month contract three trading days before the near month contract expires. The same provision shall also apply for calendar spreads in Single Stock Futures contracts.

Exposure Limits

It has been prescribed that the notional value of gross open positions at any point in time in the case of Index Futures and all Short Index Option Contracts shall not exceed 33 1/3 (thirty three one by three) times the liquid networth of a member, and in the case of Stock Option Contracts, the notional value of gross short open position at any point in time shall not exceed 20 (twenty) times the liquid networth of a member.

In the case of Single Stock Futures Contracts the value of gross open positions at any point in time in all the Single Stock Futures contracts shall not exceed 20 (twenty) times the available liquid networth of a member. Therefore, the exchanges would be required to ensure that 5% of the notional value of gross open position in Single Stock Futures contracts is collected /adjusted from the liquid networth of a member on a real time basis. Exposure limits are in addition to the initial margin requirements.

Exposure limit for calendar spreads in the case of Single Stock Futures contracts: As prescribed in the case of index futures contract, the Calendar Spread shall be regarded as an open position of one third (1/3rd) of the mark to market value of the far month contract. As the near month contract approaches expiry, the spread shall be treated as a naked position in the far month contract three days prior to the expiry of the near month contract. The same provision shall apply to the spread positions in the case of Single Stock Futures contract. If the closing out of one leg of a calendar spread causes the members’ liquid net worth to fall below the minimum levels specified, his terminal shall be disabled and the clearing corporation / house shall take steps to liquidate sufficient positions to restore the members’ liquid net worth to the levels mandated.

Real Time Computation

The computation of Worst Scenario Loss has two components. The first is the valuation of the portfolio under sixteen scenarios. At the second stage, these Scenario Contract Values are applied to the actual portfolio positions to compute the portfolio values and the initial margin (Worst Scenario Loss). For computational ease, exchanges are permitted to update the Scenario Contract Values only at discrete time points each day and the latest available Scenario Contract Values would is applied to member/client portfolios on a real time basis.

However, in order to ensure that the most recent scenario are applied for computation of the portfolio values and the initial margin, on introduction of Single Stock Futures, it shall be prescribed that the scenario contract values shall be updated atleast 5 times in the day, which may be carried out by taking the closing price of the previous day at the start of trading and the prices at 11:00 a.m., 12:30 p.m., 2:00 p.m., and at the end of the trading session.

Margin Collection and Enforcement

As prescribed in the case of index futures contract, the mark to market settlement of Single Stock Futures contracts shall also be collected before start of the next day’s trading, in cash. If mark to market margins is not collected before start of the next day’s trading, the clearing corporation/house shall collect correspondingly higher initial margin to cover the potential for losses over the time elapsed in the collection of margins. The higher initial margin shall be calculated in the same manner as specified in the Prof. J.R Varma committee reports on risk containment measures for index futures.

The daily closing price of Single Stock Futures Contract for Mark to Market settlement would be calculated on the basis of the last half an hour weighted average price of the contract. In the absence of trading in the last half an hour the theoretical price would be taken. The Derivative Exchanges/ Segment shall define the methodology of calculating the ‘theoretical price’ at the time of making an application for approval of the stock futures contract to SEBI and methodology for calculating the ‘theoretical price’ would also be disclosed to the market. In addition, the exchange shall also specify the methodology for arriving at the closing price at the time of expiry.

The initial margin (or the worst scenario loss) plus the calendar spread charge shall be adjusted against the available Liquid Networth of the member. The members in turn shall collect the initial margin from their clients.

Position Limits

On the introduction of index futures contracts, index options contracts and stock options contracts the trading member level and the market wide position limits were prescribed. However, with the introduction of Single Stock Futures contracts, a customer level position limit is also prescribed to deter and detect concentration of positions and market manipulation. The market wide position in the case of stock specific derivative contract (both stock options and Single Stock Future) shall be applicable on the cumulative open positions in derivative contracts on that that stock at an Exchange. The volumes in the derivative markets are growing steadily and therefore, position limits shall be reviewed by the Advisory Committee on Derivatives from time to time and also the Advisory Committee shall be empowered to weed out any operational issue in implementation of the position limits.

Client / Customer level position limits:

The gross open position across all derivative contracts on a particular underlying of a customer/client should not exceed the higher of –

1% of the free float market capitalisation (in terms of number of shares).

5% of the open interest in the derivative contracts on a particular underlying stock (in terms of number of contracts).

This position limits would be applicable on the combine position in all derivative contracts on an underlying stock at an exchange.

At present the trading system of the exchange requires that client ID should be provided for each trade. However, this client ID is assigned by the trading member is not unique to a client across the market. At present the exchange monitors the trading member level position limits however, the client wise limit is not monitored by the exchange and is a requirement of disclosure by the client to the trading member and to the Exchange. With the introduction of Single Stock Futures Contracts the exchanges shall develop a system to monitor client level position limits through their computer system not only with respect to one trading member but also across all the trading members through whom the client is trading in the derivative markets. This would be in addition to the disclosure requirement prescribed for clients. This would require setting up of a system and database which would capture all the details of clients of all the trading members. The system then would identify a common client, who may be trading through more than one trading member, on the basis of some key fields. The setting up of such a database and the system would be required to be completed in a time bound manner in various stages as under: -

In the first stage, the exchange shall immediately commence monitoring client level position using the client ID given by the trading member.

In the second stage, the exchange shall collect a unique client identification key which could be PAN number, Depository number etc. and on the basis of that key, the position of the client across all trading members in an exchange could be monitored at least once in the life time of a contract. This could take three to four months for the exchanges to implement.

In the final stage, exchanges shall collect complete particulars of all the clients from the trading members. The exchange shall develop a system to identify a client trading through more than one trading member and monitor his cumulative positions taken through all the members of the exchange. This would take a longer time and would be implemented simultaneously for both the cash segment and derivative segment, as the database shall be common for both the markets.

Trading Member Level:

At the trading member level the position limit in derivative contracts on a particular stock would be at 7.5% of the open interest or Rs 50 crore whichever is higher for derivative contract in a particular underlying at an exchange. The exchanges shall however specify lower Trading Member level limits for generating surveillance alerts.

Once a member reaches the position limit in a particular underlying then the member shall be permitted to take only offsetting positions (which result in lowering the open position of the member) in derivative contracts on that underlying. In the event, that the position limit is breached due to the reduction in the overall open interest in the market, the member shall be permitted to take only offsetting positions (which result in lowering the open position of the member) in derivative contract in that underlying and no fresh positions shall be permitted. The position limit at trading member level shall be computed on a gross basis across all clients of the Trading member.

Market wide limits:

The market wide limit of open positions (in terms of the number of underlying stock) on an option and futures contract on a particular underlying stock would be lower of –

30 times the average number of shares traded daily, during the previous calendar month, in the cash segment of the Exchange,

10% of the number of shares held by non-promoters i.e. 10% of the free float, in terms of number of shares of a company.

This market wide limit prescribed for stock option contracts has been increased from 20 time the average number of shares traded daily to 30 times as these limits would be applicable for both futures and options contracts on a particular underlying stock. Therefore, all the open position in all futures and option contracts on a particular underlying should not exceed the aforementioned market wide position limit.

When the total open interest in a contract reaches 80% of the market wide limit in that contract, the exchanges would double the price scan range and volatility scan range specified. The exchanges are required to continuously review the impact of this measure and take further proactive risk containment measures as may be appropriate, including, further increases in the scan ranges and levying additional margins. Additionally, the exchanges may also set alerts at lower levels for internal surveillance.

The Derivative Exchange/Segment shall submit their proposal for approval of the Single Stock Futures Contracts to SEBI which shall include:

the details of proposed derivative contract to be traded on the exchange which would include:

Symbol
Underlying
Multiplier
Last Trading Day
Margins
Methodology for calculating closing price for mark to market settlement.
Methodology for calculating closing price at time of expiry
Trading Hours

the economic purpose it is intended to serve,
likely contribution to market development,
the safeguards and the risk protection mechanism adopted by the exchange to ensure market integrity, protection of investors and smooth and orderly trading,
the infrastructure of the exchange and the surveillance system to effectively monitor trading in Single Stock Futures contracts,
details of settlement procedures & systems with regard to Single Stock Futures.

Yours sincerely,

N. PARAKH

SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021

SMD/DC/Cir-9/01
August 24, 2001

To,

The Chief Executive Officer
of Derivative Segment of NSE & BSE

Dear Sir,

Reporting of derivative transactions to the media and the newspapers.

In the meeting of the derivative exchange/segments, held on August 2, 2001, it was decided that reporting of derivative transactions to the media and the newspapers should be in a uniform format.

Accordingly, the Derivative Exchanges / Segments and their Clearing House/Corporation are required to report the following details for the transactions in derivative contracts, to the media/newspapers, on a daily basis:

Contracts Description
Number of contracts traded
Notional Value (for option contracts, notional value would be calculated as [strike + Premium] * lot size * number of contracts traded).
Open
High
Low
Value of premium traded (for option contracts)
Open Interest (in number of contracts)

Yours sincerely,

(N. PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL

SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021

SMDRP/DC/CIR- 8/01
June 21, 2001

To,

The Chief Executive Officer/ Managing Director
of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.

Dear Sir,

Sub: Adjustment of Corporate Actions for Stock Option.

The ‘Technical Group’ headed by Prof. J.R Varma, set up to prescribe risk containment measures for new derivative products, has recommended the risk containment measure for Exchange traded Stock Option Contracts. The Technical Group had set up a sub group comprising officials of BSE & NSE to determine a common methodology for adjusting corporate actions on Stock Options. Based on the recommendation of the sub-group, the Technical Group decided that since options on common stock would be trading on both NSE & BSE the corporate adjustment for the Option on the same underlying should be uniform across markets. While a uniform adjustment methodology could be adopted for certain corporate action, it would be difficult to specify any uniform policy for all corporate actions at this stage. For this purpose, it has been decided to constitute a group comprising NSE, BSE and other knowledgeable persons, which would decide a uniform course of action for adjusting stock option contracts on corporate actions, taking into account best practices followed internationally, where a uniform criterion cannot be laid down at persent. However, certain adjustments for Corporate Actions for Stock Options would be as follows:

1) The basis for any adjustment for corporate action shall be such that the value of the position of the market participants on cum and ex-date for corporate action shall continue to remain the same as far as possible. This will facilitate in retaining the relative status of positions viz. in-the-money, at-the-money and out-of-money. This will also address issues related to exercise and assignments.

2) Any adjustment for corporate actions shall be carried out on the last day on which a security is traded on a cum basis in the underlying cash market.

3) Adjustments shall mean modifications to positions and / or contract specifications as listed below such that the basic premise of adjustment laid down under 1. above is satisfied :

a) Strike Price
b) Position
c) Market Lot / Multiplier

The adjustments shall be carried out on any or all of the above based on the nature of the corporate action. The adjustments for corporate actions shall be carried out on all open, exercised as well as assigned positions.

4) The corporate actions may be broadly classified under stock benefits and cash benefits. The various stock benefits declared by the issuer of capital are :

Bonus
Rights
Merger / De-merger
Amalgamation
Splits
Consolidations
Hive-off
Warrants, and
Secured Premium Notes (SPNs) among others.
Extraordinary dividends

5) The methodology proposed to be followed for adjustment of various corporate actions to be carried out are as follows :

Bonus, Stock Splits and Consolidations
Strike Price: The new strike price shall be arrived at by dividing the old strike price by the adjustment factor as under.
Market Lot / Multiplier: The new market lot / multiplier shall be arrived at by multiplying the old market lot by the adjustment factor as under.
Position: The new position shall be arrived at by multiplying the old position by the adjustment factor as under.

The adjustment factor for Bonus, Stock Splits and Consolidations is arrived at as follows:

Bonus
Ratio – A : B Adjustment factor : (A+B)/B

Stock Splits and Consolidations
Ratio – A : B Adjustment factor : B/A

Right
Ratio – A : B Premium – C Face Value – D Existing Strike Price : X
New Strike Price : ((B * X) + A * (C + D))/(A+B)

Existing Market Lot / Multiplier / Position: Y
New issue size : Y * (A+B)/B

The above methodology may result in fractions due to the corporate action e.g. a bonus ratio of 3:7. With a view to minimizing fraction settlements, the following methodology is proposed to be adopted:

1. Compute value of the position before adjustment
2. Compute value of the position taking into account the exact adjustment factor
3. Carry out rounding off for the Strike Price and Market Lot
4. Compute value of the position based on the revised strike price and market lot

The difference between 1 and 4 above, if any, shall be decided in the manner laid down by the group by adjusting Strike Price or Market Lot, so that no forced closure of open position is mandated.

6) Dividends which are below 10% of the market value of the underlying stock, would be deemed to be ordinary dividends and no adjustment in the Strike Price would be made for ordinary dividends. For extra-ordinary dividends, above 10% of the market value of the underlying stock, the Strike Price would be adjusted.

7) The Exchange may on a case to case basis carry out adjustments for other corporate actions as decided by the group in conformity with the above guidelines.

Yours sincerely,

(N.PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL

SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021

SMDRP/DC/CIR- 7/01
June 20, 2001

To,
The Chief Executive Officer/ Managing Director
of Derivative Segment of NSE & BSE
and their Clearing House / Corporation.

Dear Sir,

Sub: Risk containment measures for Stock Option.

This is in continuation of SEBI Circular No. IES/DC/CIR-4/99 dated July 28, 1999 & Circular No. IES/DC/CIR-5/00 dated December 11, 2000 wherein SEBI had laid down the risk containment measures for Exchange traded Index Futures and Index Option Contracts.

SEBI has setup a ‘ Technical Group’ headed by Prof. J.R Varma to prescribe risk containment measures for new derivative products. The group has recommended the introduction of Exchange traded Options on Stocks, which is also in conformity with the sequence of introduction of derivative products recommended by Dr. L.C Gupta Committee.

The ‘Technical Group’ has recommended the risk containment measure for Exchange traded Options on Stocks. While SEBI would not mandate any particular risk management product, the framework shall be consistent with the risk management guidelines mandated by the L. C. Gupta Committee. The Exchanges are free to decide whether they want to adopt any of the risk management models available globally or else may like to develop their own models for risk management.

The following are the risk containment measures to be adopted by the derivative exchange/segment and the Clearing House/Corporation for the trading and settlement of Option Contracts on Stocks:

The Stock Option Contracts to be traded on the derivative exchange/segments shall have prior approval of SEBI. The Contract should comply with the disclosure requirements, if any, laid down by SEBI.
The Exchanges shall introduce Premium Settled American Style Stock Options, which shall be settled in cash at exercise, for an initial period of six months, thereafter, the Stock Options, at exercise, shall be settled by delivery.
The Stock Option Contract shall have a minimum contract size of Rs. 2 lakhs at the time of its introduction in the market.
The Stock Option contract shall have a maximum maturity of 12 months and shall have a minimum of 3 strikes (in the money, near the money and out of the money)
The Initial Margin requirements shall be based on worst case loss of a portfolio of an individual client to cover 99% VaR over a one day horizon. The Initial Margin requirement shall be netted at level of individual client and it shall be on gross basis at the level of Trading / Clearing Member. The Initial margin requirement for the proprietary position of Trading/Clearing member shall also be on net basis.
A portfolio based margining approach shall be adopted which will takes an integrated view of the risk involved in the portfolio of each individual client comprising of his positions in Derivative Contracts. The parameters for such a model should include the following-

Worst Scenario Loss

The worst case loss of a portfolio would be calculated by valuing the portfolio under several scenarios (as specified in SEBI Circular No. IES/DC/CIR-5/00 dated December 11, 2000) of changes in the Stock prices and changes in the volatility of the Stock. The price range for generating the scenarios for Stock Option Contracts would be three and a half standard deviation (3.5 Sigma). The sigma value would be calculated using the methodology specified for Index Futures as per the Prof. J.R Varma Committee Report. The volatility range for generating scenarios for Stock Options would be taken at 10% for an initial period of six months, after which it shall be reviewed.

For the purpose of the calculation of option values the exchanges may use any of the following standard Option Pricing Models – Black-Scholes, Binomial, Merton, Adesi-Whaley.

The maximum loss under any of the scenario is referred to in this circular as the Worst Scenario Loss. Subject to the additions and adjustments mentioned hereunder, the Worst Scenario Loss shall be the margin requirement for the portfolio.

Short Option Minimum Margin

A Short Option Minimum Margin equal to 7.5 % of the Notional Value based on the previous days closing value of the underlying stock, of all short stock options shall be charged if sum of the Worst Scenario Loss is lower than the Short Option Minimum Margin for the given underlying.

Net Option Value

The Net Option Value shall be calculated as the current market value of the option times the number of options (positive for long options and negative for short options) in the portfolio. This Net Option Value shall be added to the Liquid Net Worth of the clearing member. This means that the current market value of short options will be deducted from the Liquid Net Worth and the market value of long options will be added thereto. Thus market to market gains and losses on option positions will get adjusted against the available Liquid Net Worth. Since the options are premium style, mark to market gains and losses will not be settled in cash for stock option positions also.

Cash Settlement of Premium

For the Stock Option positions, the premium shall be paid in by the buyers in cash and paid out to the sellers in cash on T+1 day.

Exercise & Assignment

The Exchanges are free to set exercise limits, if any, for the Stock Option Contracts. The assignment of all exercise shall be done randomly at the client level by the Exchange and its Clearing House.

Unpaid Premium

Until the buyer pays in the premium, the premium due shall be deducted from the available Liquid Net Worth on a real time basis.

Exposure Limit

The notional value of gross open positions at any point in time for Index Futures and all Short Index Option Contracts shall not exceed 33 1/3 (thirty three one by three) times the liquid networth of a member, and in case of Stock Option Contracts, the notional value of gross short open position at any point in time shall not exceed 20 (twenty) times the liquid networth of a member.

Therefore, the exchanges are required to ensure that 3% of the notional value of gross open position in Index Futures & Short Index Option Contracts, and in the case of Stock Options, 5% of the notional value of gross short open position in stock Option Contracts is collected /adjusted from the liquid networth of a member on a real time basis.

It is further clarified that the notional value of the options contract would be calculated on the basis of the previous days closing value of the underlying.

Position Limits

The existing member wise position limits in the Index Futures and Index Options market shall be applicable to Stock Options also on the basis of notional value of the contract. In addition, a market wide limit on the open position on stock option contract is also prescribed. The market wide limit of open positions (in terms of the number of underlying stock) on an option on a particular stock shall be lesser of –

o 20 times the average number of shares traded daily, during the previous calendar month, in the cash segment of the Exchange,

o 10% of the number of shares held by non-promoters i.e. 10% of the free float, in terms of number of shares of a company.

When the total open interest in a contract reaches 80% of the market wide limit in that contract, the exchanges would double the price range and volatility range as specified in Point No. (A) in this circular. The exchanges are required to continously review the impact of this measure and take further proactive risk containment measures as may be appropriate, including, further increases in the scan ranges and levying additional margins. The cash market segment of the Exchange should be informed of these developments so as to enable the cash segment also to take such risk containment and surveillance measures as may be appropriate.

I.     The computation of Worst Scenario Loss has two components. The first is the valuation of
       each option contract under sixteen scenarios using an appropriate option pricing model. The
       second is the application of these Scenario Contract Values to the actual positions in a
       portfolio to compute the portfolio values and the Worst Scenario Loss. For computational
       ease, exchanges are permitted to update the Scenario Contract Values only at discrete time
       points each day. However, the latest available Scenario Contract Values would be applied
       to member/client portfolios on a real time basis.

7. Eligibility of Stocks for Option trading

The stocks which would be eligible for option trading, should meet the following criterion:

The stock should be amongst the of top 200 scrips, on the basis of average market capitalisation during the last six months and the average free float market capitalisation should not be less than Rs.750 Crores. The free float market capitalisation means the non-promoter holding in the stock.
The stock should be amongst the top 200 scrips on the basis of average daily volume (in value terms), during the last six months. Further, the average daily volume should not be less than Rs. 5 Crore in the underlying cash market.
The stock should be traded on at least 90% of the trading day in the last six months, with the exception of cases in which a stock is unable to trade due to corporate actions like de-mergers etc.
The non promoter holding in the company should be at least 30%.
The ratio of the daily volatility of the stock vis-à-vis the the daily volatility of the Index (either BSE-30 Sensex or S&P CNX Nifty) should not be more than 4, at any time during the previous six months. For this purpose the volatility would be computed as per the Exponentially Weighted Moving Average formula specified in the Prof. J. R Varma Committee Report on the risk containment measures for Index Futures. It is further clarified that the stock on which option contracts are permitted to be traded on one derivative Exchange/Segment would also be permitted to trade on other Derivative Exchanges/Segments.

The volatility estimates calculated as mentioned in Point No.(v) above shall be calculated on the last one and a half year closing price data in the following manner:

The standard deviation of logarithmic return (natural log) would be calculated on the first six months data.
The standard deviation calculated above shall be used as Sigma (t-1) for calculation of Sigma (t) on the first day of the next one year period, by using the formula specified in the Prof. J.R Varma Committee Report on risk containment measures for index futures. The same formula would also be used to calculate the daily volatility estimates (Sigma {t}) of the entire one year period.
The above calculation would be done for individual stock and index.
Sigma (t) calculated above for individual stock and index would be used to compute the ratio of scrip volatility vis-à-vis the index volatility each day during the last six month period.

In the calculation mentioned above the closing prices of stocks should be normalised / adjusted for corporate actions like bonus, stock split, demerger etc.

At the end of six months from the date of introduction of trading in stock options, it should be verified whether the stocks on which options is permitted continues to comply with the aforementioned criterion. The eligibility criterion would be reviewed after a period of six months to examine whether, in light of the experience, the list of eligible stocks could be expanded.

8. The Derivative Exchange/Segment shall submit their proposal for approval of the stock option contract to SEBI which shall include:

the details of proposed derivative contract to be traded on the exchange which would include:

Symbol
Underlying – giving details of the calculations mentioned above and ensuring that the stock fulfills the eligibility criterion specified.
Lot Size / Multiplier
Strike Price Intervals
Premium Quotation
Last Trading Day
Expiration day/month
Exercise Style
Mode of Assignment
Time period of settlement of Option Exercise
Position and Exercise Limits
Margin
Trading Hours

the economic purpose it is intended to serve,
likely contribution to market development,
the safeguards and the risk protection mechanism adopted by the exchange to ensure market integrity, protection of investors and smooth and orderly trading,
the infrastructure of the exchange and the surveillance system to effectively monitor trading in such contracts, and
details of settlement procedures & systems with regard to Stock Options.
details of back testing of the margin calculation for a period of one year considering a call and a put option on the underlying with a delta of +25 & -25 and actual price of the underlying security.

Yours sincerely,

(N. PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL

SECURITIES AND EXCHANGE BOARD OF INDIA
SECONDARY MARKET DEPARTMENT
Mittal Court, B Wing, First Floor,
224, Nariman Point, Mumbai 400 021

SMD/DC/CGM/ CIR - 6/01
June 20, 2001

To:

The CEO – Derivatives Segment/ F&O Segment,
The National Stock Exchange Of India Ltd,
The Stock Exchange, Mumbai.

Dear Sir,

Reporting of option contracts to SEBI.

In continuation of our circular dated June 20, 2000 on reporting of derivative contracts to SEBI, you are advised to provide the additional information, as per the attached sheet, for each derivative contract, on a daily basis. Required information should be submitted to SEBI at the end of each trading day, by 5 P.M.

Yours faithfully,

(N. PARAKH)
CHIEF GENERAL MANAGER
DERIVATIVE CELL

Reporting of option contracts for the …….(date)


Product	Series	Type	Volume (in number of contracts)	Notional Value (in Rs. Crores)	Open interest at the end of the day (in no. of contracts)	VAR at the close of the day.
Index options/ Stock	June	Call
	June	Put
	July	Call
	July	Put
	August	Call
	August	Put

Mutual Funds Circulars 2002

JANUARY 2002

January 16, 2002

· SEBI Investors Education Programme – Investments in Mutual Funds
January 03, 2002

· Rendering investment advice and reporting of Compliance Officer to SEBI

Circulars prior to 1.1.2002

MUTUAL FUNDS DEPARTMENT CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR/03/526/2002
May 9, 2002

All Mutual Funds Registered with SEBI
Unit Trust of India
Association of Mutual Funds in India

Dear Sirs,

Investment in Unlisted Equity Shares

With a view to bringing about uniformity in calculation of NAVs of mutual funds schemes, the following guidelines are being issued for valuation of unlisted equity shares in consultation with Association of Mutual Funds in India (AMFI). The guidelines also prescribe exercise of due diligence while making such investments and review of their performance so as to protect the interests of investors.

Methodology for Valuation

Unlisted equity shares of a company shall be valued "in good faith" on the basis of the valuation principles laid down below:

Based on the latest available audited balance sheet, net worth shall be calculated as lower of (i) and (ii) below:

Net worth per share = [share capital plus free reserves (excluding revaluation reserves) minus Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] divided by Number of Paid up Shares.
After taking into account the outstanding warrants and options, Net worth per share shall again be calculated and shall be = [share capital plus consideration on exercise of Option/Warrants received/receivable by the Company plus free reserves(excluding revaluation reserves) minus Miscellaneous expenditure not written off or deferred revenue expenditure, intangible assets and accumulated losses] divided by {Number of Paid up Shares plus Number of Shares that would be obtained on conversion/exercise of Outstanding Warrants and Options}

The lower of (i) and (ii) above shall be used for calculation of net worth per share and for further calculation in (c) below.

(b) Average capitalisation rate (P/E ratio) for the industry based upon either BSE or NSE data (which should be followed consistently and changes, if any, noted with proper justification thereof) shall be taken and discounted by 75% i.e. only 25% of the Industry average P/E shall be taken as capitalisation rate (P/E ratio). Earnings per share of the latest audited annual accounts will be considered for this purpose.

(c) The value as per the net worth value per share and the capital earning value calculated as above shall be averaged and further discounted by 15% for illiquidity so as to arrive at the fair value per share.

The above methodology for valuation shall be subject to the following conditions:

All calculations as aforesaid shall be based on audited accounts.
In case where the latest balance sheet of the company is not available within nine months from the close of the year, unless the accounting year is changed, the shares of such companies shall be valued at zero.
If the net worth of the company is negative, the share would be marked down to zero.
In case the EPS is negative, EPS value for that year shall be taken as zero for arriving at capitalised earning.
In case an individual security accounts for more than 5% of the total assets of the scheme, an independent valuer shall be appointed for the valuation of the said security. To determine if a security accounts for more than 5% of the total assets of the scheme, it should be valued in accordance with the procedure as mentioned above on the date of valuation.

At the discretion of the AMC and with the approval of the trustees, an unlisted equity share may be valued at a price lower than the value derived using the aforesaid methodology.

Due Diligence

The mutual funds shall not make investment in unlisted equity shares at a price higher than the price obtained by using the aforesaid methodology. However, it is clarified that this will not be applicable for investment made in the initial public offers of the companies (IPOs) or firm allotment in public issues where all the regulatory requirements and formalities pertaining to public issues have been complied with by the companies and where the mutual funds are required to pay just before the date of public issue.

The boards of AMCs and trustees of mutual funds shall lay down the parameters for investing in unlisted equity shares. They shall pay specific attention that due diligence was exercised while making such investments and shall review their performance in their periodical meetings as advised in SEBI Circular no. MFD/CIR/6/73/2000 dated July 27, 2000.

Reporting of Compliance

The AMCs and trustees shall offer their comments on the compliance of these guidelines in their quarterly and half-yearly reports filed with SEBI.

These guidelines effective immediately are being issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.

Yours faithfully,

P.K.NAGPAL

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR/02/110/02
April 26, 2002

All Mutual Funds registered with SEBI
Unit Trust of India
Association of Mutual Funds in India (AMFI)

Dear Sirs,

Sub: Revised Annual Statistical Report (ASR)

Please refer to our circular letter No.IIMARP/CIR/08/845/97 dated May 7, 1997 advising you to submit statistical information on an annual basis i.e. Annual Statistical Report (ASR).

It has now been decided to revise and simplify the format of the ASR. A copy of the revised ASR is enclosed. You are advised to submit the ASR in the revised format for the financial year 2001-02 by May 15, 2002 and by 30^th of April of the succeeding year in future.

Yours faithfully,

P.K.Nagpal

Encl : as above

ANNUAL STATISTICAL REPORT (ASR)

NAME OF THE MUTUAL FUND : _________________

Unitholding Pattern of Mutual Fund as on March 31, ____

Category	Number of Investors	Net asset Value (Rs. Crores)
Individuals
NRIs/OCBs
FIIs
Corporates/Institutions/ Others
TOTAL

Note : Data is to be provided for the entire mutual fund and not scheme-wise.

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR/01/ 071/02
April 15, 2002

All Mutual Funds registered with SEBI
Unit Trust of India
Association of Mutual Funds in India (AMFI)

Dear Sirs,

Sub: Benchmarks for Debt-Oriented and Balanced Funds Schemes.

Please refer to SEBI circular No.MFD/CIR/16/400/02 dated March 26, 2002 regarding guidelines for benchmarks in case of equity oriented schemes in order to provide objective analysis of the performance of the mutual funds schemes to the investors.

It has now been decided in consultation with AMFI to disclose the performance of benchmarks in case of various types of debt-oriented schemes and balanced fund schemes while publishing half-yearly results by the mutual funds. These benchmarks shall be developed by research and rating agencies recommended by AMFI on a regular basis.

Other guidelines as specified in the aforesaid SEBI circular like change in benchmark indices at a later date, giving management perception, review of performance by the AMCs and trustees, reporting of its compliance to SEBI in the quarterly reports of AMCs and half-yearly reports of trustees, shall remain the same.

These guidelines are being issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.

Yours faithfully,

P.K. NAGPAL

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR/ 17 / 419 /02
March 30, 2002

All Mutual Funds registered with SEBI
Unit Trust of India
Association of Mutual Funds in India (AMFI)

Dear Sirs,

Re. : Guidelines for Investment in Foreign Securities by Mutual Funds

Please refer to SEBI Circular dated September 30, 1999 pertaining to investment by mutual funds in ADRs/GDRs issued by Indian Companies.

Hon’ble Finance Minister of India has made announcement in his recent budget speech that mutual funds will now be permitted to make investments in rated securities in countries with fully convertible currencies. Subsequently, RBI has also written to SEBI in this regard.

In the light of the above, the mutual funds can now make investments in foreign debt securities in the countries with fully convertible currencies, short term as well as long term debt instruments with highest rating (foreign currency credit rating) by accredited/registered credit rating agencies, say A-1/AAA by Standard & Poor, P-1/AAA by Moody’s, F1/AAA by Fitch IBCA, etc. They may also invest in government securities where the countries are AAA rated.

As there is upper limit of US 500 million dollars for the entire mutual funds industry for making investment in ADRs/GDRs and foreign securities, each mutual fund is permitted to invest up to 4% of their net assets as on 28.2.2002 subject to the maximum of US 50 million dollars. The investment in foreign securities may be made by existing mutual funds schemes or new schemes launched for this purpose. The mutual funds may also invest in the units/securities issued by overseas mutual funds or unit trusts which invest in the aforesaid securities or are rated as mentioned above and are registered with overseas regulators.

Apart from applicability of SEBI (Mutual Funds) Regulations, 1996 and guidelines issued from time to time, the mutual funds shall adhere to the following specific guidelines for making investments in foreign securities:

Due Diligence

Boards of asset management companies (AMCs) and trustees shall exercise due diligence in making investment decisions as required under Regulation 25 (2). They shall make a detailed analysis of risks and returns of investment in foreign securities, comparing them with likely yields of the securities available in domestic markets and how these investments would be in the interest of investors. Investment must be made in liquid actively traded securities.

Boards of AMCs and trustees may prescribe detailed parameters for making such investments which may include identification of countries, country rating, country limits, etc. They shall satisfy themselves that the AMC has experienced key personnel, research facilities and infrastructure for making such investments. Other specialised agencies and service providers associated with such investments e.g. custodian, bank, advisors, etc should also have adequate expertise and infrastructure facilities. Their past track record of performance and regulatory compliance record, if they are registered with foreign regulators, may also be considered. Necessary agreements may be entered into with them as considered necessary.

All investment decisions shall be recorded in accordance with SEBI circular dated July 27, 2000.

Disclosure Requirements

The following disclosure requirements shall be mandatory for mutual fund schemes proposing to invest in foreign securities.

Intention to invest in foreign securities shall be disclosed in the offer documents of the schemes. The attendant risk factors and returns ensuing from such investments shall be explained clearly in offer documents. The mutual funds shall also disclose as to how such investments will help in the furtherance of the investment objectives of the schemes. Such disclosures shall be in a language comprehensible to an average investor in mutual funds.
The mutual funds shall disclose exposure limits i.e. the percentage of assets of the scheme they would invest in foreign securities.
Such investments shall be disclosed while disclosing half-yearly portfolios in the prescribed format by making a separate heading "Foreign Securities." Scheme-wise percentage of investments made in such securities shall be disclosed while publishing half-yearly results in the prescribed format, as a footnote.

Investment by Existing Schemes:

Existing schemes of mutual funds may invest in foreign securities, consistent with the investment objectives of the schemes and where the offer documents provide for such investments and disclose attendant risk factors. Any additional disclosures as specified above shall be informed to unitholders by way of addendum. In case the offer document of an existing scheme does not provide for investment in foreign securities, the scheme, if it so desires, may make such investments in accordance with these guidelines, provided that:

It obtains approval from the trustees who shall follow the procedure of due diligence as mentioned above and shall ensure that the AMC possesses adequate expertise and infrastructure for making such investments.
It informs the unitholders by communication to each unitholder about its intention to make investment in foreign securities and making all disclosures as mentioned earlier in these guidelines and giving them the option to exit without load in accordance with the provisions of the Regulations. The unitholders shall be given at least 21 days’ time period to exercise their option.

Reporting to Trustees :

The AMCs shall send detailed periodical reports to the trustees which shall include the following aspects:

Performance of investments made in foreign securities in various countries.
Amount invested in various schemes and any breach of the exposure limit laid down in the scheme offer documents.

Review of Performance

Boards of AMCs and trustees shall review the performance of investments made in foreign securities in their meetings by comparing the yield with that of investment opportunities available in domestic markets and shall decide further course of action. In case of schemes investing exclusively in foreign securities, performance may also be compared with appropriate benchmark(s).
Reporting to SEBI

The AMCs and trustees shall offer their comments on the compliance of these guidelines in the quarterly and half-yearly reports filed with SEBI.

7. How to Apply

The mutual funds who desire to invest in foreign debt securities may apply in duplicate in the form enclosed herewith. SEBI would forward a copy of the form to the RBI for their approval as is the procedure in case of making investment in ADRs/GDRs issued by Indian companies.

These guidelines are being issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.

Yours faithfully,

P.K. NAGPAL

PROPOSAL FOR INVESTMENTS IN ADRs/GDRs/ FOREIGN SECURITIES

(To be submitted in duplicate)

Name of the Mutual Fund:

SEBI Registration No.:

Amount Proposed to be Invested in ADRs /GDRs /Foreign securities (Rs. crores)

Net Assets of the Fund as on February 28,2002(Rs crores)

Schemes of the Mutual Fund through which investment is proposed: Name of scheme(s) Type- Equity/debt

Whether the investment is consistent with the Investment Objectives of the Scheme (s);

Whether the offer document(s) provides for Overseas Investments and discloses the attendant risks. If not, whether option to unitholders to exit without load has been given / is proposed to be given. (Please file a copy of addendum with SEBI while writing to unitholders).

Name and Address of the branch of the bank through which Foreign Currency Transactions are to be routed:

Details of all overseas service providers proposed to be engaged including custodians, specialised agencies etc. (Details must include name & address, services to be rendered, details of fee arrangement proposed, whether their track record of performance and regulatory compliance considered, their valid registration with overseas regulators, details of experience/expertise, assets under management/custody, etc.)

Declaration

Boards of AMC and trustees have exercised due diligence as required under Regulation 25(2) and Guidelines issued in this regard.

2. Board of AMC and trustees are satisfied that

The proposed investments in ADRs/GDRs issued by Indian companies or foreign securities are consistent with the investment objectives of the above mentioned scheme(s) and are in the interest of investors.
The systems and procedures adopted by the AMC including the arrangements made with the overseas service providers are adequate to support such investments and to safeguard the interest of investors.
The overseas service providers have sufficient experience, competence and a satisfactory track record of performance and regulatory compliance.

A resolution to the above effect has been passed by the Boards of AMC and trustees on ……….(dates)Place: Signatures

Name:

Date: Designation:

(Authorised by trustees )

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR/ 16 / 400 /02
March 26, 2002

All Mutual Funds registered with SEBI
Unit Trust of India
Association of Mutual Funds in India (AMFI)

Dear Sirs,

Sub : Introduction of Benchmarks

As you are aware, all mutual funds are required to disclose the performance of their schemes during the last six months, 1 year, 3 years, 5 years and since the date of launch of the schemes while publishing their half-yearly results in the prescribed format. In order to give the investors objective analysis of the performance of the mutual funds schemes in comparison with the rise or fall in the markets, it has been decided in consultation with AMFI to disclose the performance of benchmark indices also.

For the present, all mutual funds shall disclose the performance of the benchmark indices in case of equity oriented schemes below the yields of the schemes in the format for half-yearly results. The mutual funds may select any of the indices available, e.g. BSE (Sensitive) index, S&P CNX Nifty, BSE 100, BSE 200 or S&P CNX 500, depending on the investment objective and portfolio of the scheme. In case of sector or industry specific schemes, they may select any sectoral indices published by stock exchanges and other reputed agencies. These benchmark indices may be decided by the AMCs and trustees and any change at a later date shall be recorded and reasonably justified.

As the purpose of introducing benchmarks is to indicate the performance of the markets to the investors, the mutual funds may give performance of more than one index if they so desire. Also, they have the option to give their management perception on the performance of their schemes.

In accordance with SEBI circular dated July 27, 2000, the AMCs and trustees are required to review the performance of their schemes on periodical basis. They may compare the performance of their schemes with benchmarks in all of their meetings. They may also review the performance of their schemes in the light of performance of the mutual funds industry as published from time to time by independent research agencies and financial newspapers and journals and may take corrective action in case of unsatisfactory performance. Its compliance may please be reported in the quarterly reports of AMCs and half-yearly reports of trustees to SEBI while reporting compliance of Regulation 25(2) on exercise of due diligence in investment decisions.

These guidelines are being issued in accordance with the provisions of Regulation 77 of SEBI (Mutual Funds) Regulations, 1996.

Yours faithfully,

P.K. NAGPAL

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR/15/041/2002
March 14, 2002

All Mutual Funds registered with SEBI
Unit Trust of India (UTI)
Association of Mutual Funds in India (AMFI)

Dear Sir,

Re. : Publication of audited annual accounts by mutual funds

The Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 require the mutual funds to publish their half-yearly results in newspapers and disclosure of full portfolio on half-yearly basis within one month from the end of the half-year. As you are aware, sometime back, we revised and simplified the formats of both these statements so that the investors may get meaningful information about the performance and operations of the mutual fund and also to know how their funds have been deployed.

Regulation 56 of the Regulations also requires a mutual fund to publish through an advertisement its scheme-wise annual report or an abridged summary thereof not later than six months from the date of closure of relevant accounting year and a copy of the abridged annual report is required to be sent to each unitholder.

Considering the representation by AMFI, we have amended Regulation 56 so that publishing of scheme wise annual report or abridged annual report in the newspapers by the mutual funds would not be required now. However, the mutual funds shall continue to send the annual report or abridged annual report to the unitholders. Further, all mutual funds are advised to display the scheme-wise annual reports on their web sites. These web sites should also be linked with AMFI web site so that the investors and analysts can access the annual reports of all mutual funds at one place

We are enclosing a copy of the Gazette Notification dated February 20, 2002 amending the SEBI (Mutual Funds) Regulations, 1996, as mentioned above, for your information and implementation.

Yours faithfully,

P.K. Nagpal

Encl. : as above

THE GAZETTE OF INDIA

EXTRA ORDINARY

PART II SECTION 3 SUB-SECTION (ii)

PUBLISHED BY AUTHORITY

SECURITIES AND EXCHANGE BOARD OF INDIA

NOTIFICATION

MUMBAI, THE 20^th DAY OF FEBRUARY 2002

SECURITIES AND EXCHANGE BOARD OF INDIA (MUTUAL FUNDS) (AMENDMENT) REGULATIONS, 2002

S.O.219(E) In exercise of the powers conferred by sub-section (1) of Section 30 of the Securities and Exchange Board of India Act, 1992 (15of 1992), the Securities and Exchange Board of India hereby makes the following regulations namely :-

I ( i ) These regulations may be called the Securities and Exchange Board of India (Mutual Funds) (Amendment) Regulations, 2002.

( ii ) They shall come into force on the date of their publication in the Official Gazette.

II In Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 :-

1. In regulation 56,

( a ) In the heading for the word 'Publication' the word 'Mailing shall be substituted .

(b) in sub-regulation (1), the words "shall be published through an advertisement and an abridged scheme wise annual report" shall be omitted.

( c ) In regulation 56 ( 2 ) the words "provided further that full portfolio disclosure is not required if the full accounts are published in news papers" shall be omitted.

( d ) In sub regulation 3 of regulation 56 for the word "if published in summary form " the word 'mailed in abridged summary form as per sub regulation ( 1 )" shall be substituted.

[F. No . SEBI/LE/2834/2002]

D.R.MEHTA
CHAIRMAN
SECURITES AND EXCHANGE BOARD OF INDIA

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD/CIR No.14/442/2002
February 20, 2002

All Mutual Funds Registered with SEBI
Unit Trust of India
Association of Mutual Funds in India

Dear Sirs,

As you are aware, SEBI issued guidelines for valuation of securities vide circulars dated September 18, 2000 and March 28, 2001.

Association of Mutual Funds in India (AMFI) has made a representation for certain modifications in the guidelines. After examining the matter, the following modifications have been made in the guidelines:

Traded Securities

The definition for traded securities given on page 1 of the circular dated September 28, 2000 shall be replaced by the following definition :
When a security (other than debt securities) is not traded on any stock exchange on a particular valuation day, the value at which it was traded on the selected stock exchange, as the case may be, on the earliest previous day may be used provided such date is not more than thirty days prior to valuation date.
When a debt security (other than Government Securities) is not traded on any stock exchange on any particular valuation day, the value at which it was traded on the principal stock exchange or any other stock exchange, as the case may be, on the earliest previous day may be used provided such date is not more than fifteen days prior to valuation date. When a debt security (other than Government Securities) is purchased by way of private placement, the value at which it was bought may be used for a period of fifteen days beginning from the date of purchase.
Thinly Traded Debt Security

The definition of a thinly traded debt security given in pt. 2 (page 2) of circular dated March 28, 2001 shall be replaced by the following definition :
A debt security (other than Government Securities) shall be considered as a thinly traded security if on the valuation date, there are no individual trades in that security in marketable lots (currently Rs 5 crore) on the principal stock exchange or any other stock exchange.
Construction of Risk Free Benchmark

The paragraph on Construction of Risk Free Benchmark given on page 4 of the circular dated September 18, 2000 for valuation of securities shall be replaced by the following paragraph :
GOI dated securities will be grouped into various duration buckets such as 0.5-1 years, 1-2 years, 2-3 years,3-4 years, 4-5 years, 5-6 years and 6 years and the volume weighted yield would be computed for each bucket. These duration buckets may be changed to reflect the market value more closely by any agency suggested by AMFI giving benchmark yield/matrix of spreads over benchmark yield.
The benchmark as calculated above will be set at least weekly, and in the event of any significant movement in prices of Government Securities on account of any event impacting interest rates on any day such as a change in the Reserve Bank of India (RBI) policies, the benchmark will be reset to reflect any change in the market conditions.

Mark up/ Mark down yield

The discount adjustments provided for securities rated by external rating agencies and internally rated securities on page 5 [Clauses C(I) & C(II)] of the circular dated September 18, 2000, shall be revised as follows :

Category Discretionary discount over benchmark yield in basis points

Rated Instruments with duration upto 2 years Discretionary Discount of upto +100

Rated Instruments with duration over 2 years Discretionary Discount of upto +75

Unrated Instruments with duration upto 2 years Discretionary Discount of upto +50 over and above the mandatory Discount of +50

Unrated Instruments with duration over 2 years Discretionary Discount upto +50 over and above the mandatory Discount of +25

Other contents of these clauses remain unchanged.

Application of Benchmark yield for valuation on the date of its release by any agency suggested by AMFI

A new clause namely C(III) will appear after Clause C(II) [page 5] of the circular dated September 18, 2000.
The benchmark yield/matrix of spreads over benchmark yield obtained from any agency suggested by AMFI as a provider of benchmark yield/matrix of spreads over benchmark yield to mutual funds, must be applied for valuation of securities on the day on which the bench mark yield/matrix of spreads over benchmark yield is released by the aforesaid agency.
Valuation of Government Securities

For valuation of government securities, all the mutual funds are advised to use the prices for Government Securities released by an agency suggested by AMFI for the sake of uniformity in calculation of NAVs.These guidelines effective immediately are being issued in accordance with the provisions of Regulation 77 of SEBI(Mutual Funds) Regulations, 1996.

Yours faithfully,

P.K. NAGPAL

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD / CIR No.13 /370 /02
January 16, 2002

All Mutual Funds registered with SEBI
Unit Trust of India
Association of Mutual Funds in India

Dear Sirs,

Re.: SEBI Investors Education Programme – Investments in Mutual Funds

In order to educate the investors to understand the basics of Mutual Funds and their operations, SEBI has prepared a brochurein question-answer format explaining the fundamental issues pertaining to mutual funds. A copy thereof is enclosed.

You would appreciate that the awareness among the investors about the functioning of mutual funds would help in the healthy growth of the mutual funds industry. You are advised to circulate copies of the brochure among your distributors and agents (including brokers, banks, post offices) and the investors. You may publish the same as small booklets. In that case while the booklets must bear SEBI name and logo, you may give your name as publisher. As a first step, please display it prominently on your web sites at the earliest.

AMFI may consider including the brochure as apart of study material for their training programmes for investors and for their certification programme conducted for agents and distributors.

Please keep us informed about the steps taken by you in this regard from time to time.

Yours faithfully,

P. K. NAGPAL

CHIEF GENERAL MANAGER
MUTUAL FUNDS DEPARTMENT

MFD / CIR No. 12 / 362 /02
January 3, 2002

All Mutual Funds registered with SEBI/
Unit Trust of India
Association of Mutual Funds in India

Dear Sirs,

Re:Rendering investment advice and reporting of Compliance
Officer to SEBI

We are enclosing a copy of Gazette Notification dated May 29, 2001 amending SEBI (Mutual Funds) Regulations, 1996 pertaining to rendering investment advice and reporting of non-compliance of regulations to SEBI by the compliance officer.

Regarding reporting by the compliance officer, we have examined the representation dated August 1, 2001 received from Association of Mutual Funds in India. It has been decided that the amended regulations must be implemented strictly.

Yours faithfully,

P. K. NAGPAL

Encl : As above

Securities and Exchange Board of India, (Mutual Funds) Regulations, 1996

1.The clause (d) of sub-regulation (4) of regulation 18 shall be substituted by the following -

"(d) appointed a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines instructions etc issued by the Board or the Central Government and for redressal of investors’ grievances."

2.After sub-regulation (4) a new sub-regulation (4a) shall be inserted as under

"(4a) The compliance officer appointed under clause (d) of sub-regulation (4) shall immediately and independently report to the Board any non-compliance observed by him."

1.In FIFTH SCHEDULE after clause (10), a new clause (11) shall be inserted as under

–
"(11) (a) The sponsor of the mutual fund, the trustees or the asset management company or any of their employees shall not render, directly or indirectly any investment advice about any security in the publicly accessible media, whether real – time or non real-time, unless a disclosure of his interest including long or short position in the said security has been made, while rendering such advice.

(b) In case, an employee of the sponsor, the trustees or the asset management company is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice."

PMD Circulars 2002

JANUARY 2002

January 11, 2002

· Amendments to the SEBI (Disclosure and Investor Protection) Guidelines, 2000

Circulars prior to 1.1.2002

RMB (Compendium) Series Circular No. 3 (2001- 2002)

January 11, 2002

To All Registered Category I Merchant Bankers

Dear Sirs,

Sub: Amendments to the SEBI (Disclosure and Investor Protection) Guidelines, 2000

The Board, in its meeting held on March 15, 2001, considered and approved certain modifications in the SEBI (DIP) guidelines in order to introduce the facility of issue of debt securities without issue of equity, for companies desirous of coming out with a public issue.

Accordingly, the amendments that have been made in the Guidelines are enclosed.

Further, the existing clause 8.2.2.1 stands deleted as the same appears as clause 8.21.2 of the guidelines.

These amendments shall come into force from the date of the circular.

Yours faithfully,

R.M. JOSHI

Executive Director

SMD Circulars 2002

General Manager
Secondary Market Department

SMD/Policy/Cir-12/2002
May 17, 2002

The Executive Directors/Managing Directors
Of all the Stock Exchanges

Dear Sir/Madam,

Pursuant to the discussions in the meeting of the Group on Risk Management Systems for the Equity Markets held on April 2002, the following decisions have been taken:-

Currently, in terms of press releases dated March 05, 2001 and circular no. SMDRP/Policy/Cir-34/2001, the financial institutions, FIIs, banks, and mutual funds were required to pay margins on their sale position in scrips where there is a positive differential between the minimum VaR(1.75 times Index VaR) and the actual scrips VaR.

This margin was imposed as a temporary measure. Since the imposition of this margin, the market structure and the overall margin system have undergone a major change. The market has moved from an account period settlement to rolling settlement on T+5 basis and further reduced to T+3. Considering this, the Group in its meeting has decided to withdraw margins on the sale side applicable on the financial institutions, FIIs, banks and mutual funds.
Pursuant to the events of September 11, 2001, a price band of 10% was imposed on 53 stocks on which derivatives products are available.

This was as a temporary preventive measure to address excessive market volatility. The Group in its meeting decided that since this was a temporary measure, the price band of 10% as imposed earlier be withdrawn.
Vide circular no SMDRP/POLICY/CIR-33/2000 dated July 27, 2000, it was directed that all the clients, excluding FIs, FIIs, MFs shall maintain a deposit with the broker in the form of cash, bank guarantees, FDRs or approved securities which shall not be less than 10% of the net open positions of the client at any point of time. It was stipulated in circular no. SMDRP/Policy/Cir-6/2001 that to ensure compliance with this requirement, the stock exchanges

would obtain an auditors' certificate to this effect from all brokers on a quarterly basis and that the brokers in turn, shall obtain a similar certificate from their sub-brokers.

It has been decided that for the collection of 10% upfront margin from clients only trades which would result in a margin of Rs 50,000 or more should be considered. In other words, if clients position exceeds Rs. 5 lacs the broker would be necessarily required to collect 10% margin from the clients. Further, It has also been decided that the certification of the collection of this upfront margin will be done by the compliance officer as appointed in terms of regulation 18A of the Securities and Exchange Board of India, (Stock Brokers and Sub-Brokers) Regulations, 1992.

You are advised to take steps for the implementation of the above decisions immediately.

Yours faithfully,

P K Bindlish

GENERAL MANAGER
SECONDARY MARKET DEPARTMENT

SMD/Policy/Cir-11 /02
May 10, 2002

To,

The Executive Director/Managing Director
Of all the Stock Exchanges
Dear Sir/Madam,

SUB: Amendment to the Listing Agreement

The Accounting Standards Committee of SEBI has recommended certain amendments in the Clause 41 of the Listing Agreement.

It has been decided to implement the following recommendations of the Committee:

Amendment to Clause 41 of the Listing Agreement

The companies which opt to publish audited results for the entire year within 3 months instead of publishing un-audited results for the last quarter within 30 days shall be required to publish annual audited results in the format specified in Annexure I.
Disclosure of audit qualifications:

Audit qualifications shall be disclosed in the un-audited/audited financial results published by companies under Clause 41 of the Listing Agreement alongwith the impact of audit qualifications on the profit or loss
when there is an audit qualification in the accounts of a listed company, the stock exchange shall ask the company to explain

why there is audit qualification in their accounts,
why the company failed to publish accounts without audit qualifications and
when the company will remove the qualifications and publish account without qualifications.

The Exchanges are advised to incorporate the above amendments in the Listing Agreement immediately and also confirm compliance.

Yours faithfully,

S RAVINDRAN

Encl.: as above.

ANNEXURE I

FORMAT FOR PUBLICATION ANNUAL AUDITED RESULTS

(Rs. in Lakhs)

Particulars	(1) Figures for the 9 months	(2) Figures for the last quarter	(3) Figures for the corresponding quarter of the previous year	(4) Audited figures for the current year	(5) Audited figures for the previous year
1. Net Sales/Income from Operations
Other Income
Total Expenditure Increase/decrease in stock in trade Consumption of raw materials Staff cost Other expenditure (Any item exceeding 10% of the total expenditure to be shown separately).
Interest
Depreciation
Profit (+)/Loss(-) before tax (1+2-3-4-5)
Provision for taxation
Net Profit (+)/Loss (-) (6-7)
Paid-up equity share capital (face value of the share shall be indicated)
Reserves excluding revaluation reserves (as per balance sheet) of previous accounting year to be given in column (5)
Basic and diluted EPS for the period, for the year to date and for the previous year (not to be annualised)
(Applicable for half yearly financial results)aggregate of non promoting shareholding* no. of shares percentage of shareholding

*Non promoters shareholding- as classified under category B in the shareholding pattern in the Clause 35 of Listing Agreement

Notes:

All the notes applicable to the format of un-audited quarterly financial results specified under Clause 41 of the Listing Agreement shall also be applicable to this format.

[BACK]

GENERAL MANAGER
SECONDARY MARKET DEPARTMENT
E-mail: pkb@sebi.gov.in

SMD/Policy/Cir-10/2002
May 07, 2002

The Executive Directors/Managing Directors
Of all the Stock Exchanges

Dear Sir/Madam

SUB : Amendment to the Listing Agreement

Please refer to the Circular No. SMDRP/POLICY/CIR-46/2001 dated September 27, 2001, where the stock exchanges were advised about the decision taken in the meeting of the stock exchanges held on August 14, 2001, pertaining, inter alia, to delay in transfer of shares by the companies. The said circular also specified the norms to be observed by the companies for dealing with cases where transfer of shares is delayed beyond a stipulated time period for certain reasons viz., signature difference etc. The said circular, inter alia, provides that the company would compensate the aggrieved party / parties in cases where there is a delay on the part of the company in either transferring the shares or communicating the objection to the transfer of shares, within the stipulated time period of one month

In this respect, in order to give effect to the above, you are advised to amend the Listing Agreement to incorporate after sub-clause (1), of Clause 12A the following new sub-clause (1a) as under.

"(1a) The company agrees that in respect of transfer of shares where the company has not effected transfer of shares within 1 month or where the company has failed to communicate to the transferee any valid objection to the transfer within the stipulated time period of 1 month, the company shall compensate the aggrieved party for the opportunity losses caused during the period of the delay.

In addition, the company keeping in view the provisions of Section 206A of the Companies Act and Section 27 of the Securities Contracts (Regulation) Act, 1956, provide all benefits (i.e. bonus shares, right shares, dividend ) which accrued to the investor during the intervening period on account of such delay."

You are also advised to accordingly amend the Bye-Laws of the exchange to provide for the mechanism of arbitration for determining the amount of compensation in case of delay in transfer of securities and delay in furnishing of the objection memo beyond the specified time.

You are advised to implement the above immediately and confirm it to SEBI.

Yours faithfully,

P. K. BINDLISH

DEPUTY GENERAL MANAGER
SECONDARY MARKET DEPARTMENT

SMD/DBA-II/Cir- 09 /2002
April 23, 2002

The Executive Directors / Managing Directors
All Stock Exchanges

Dear Sir / Madam,

SUB: REFUND OF EXCESS FEES PAID BY STOCK BROKERS TO SEBI

We have been receiving requests from Exchanges/ brokers for refund of excess fees paid by stock brokers to SEBI.

All Exchanges are advised to inform their members that request for refund of excess fee would be processed only if the member concerned has paid excess over the fees and interest payable.

Further, requests by members for refund of excess fees should be routed through the concerned Exchange and should be accompanied by statement of turnover duly computed and certified by the concerned Exchange in the format specified in Annex- C of circular no.SMD/Policy/Cir-07/2002 dated March 28, 2002 and forwarded in hard & soft copy format as per the said circular and fee liability duly computed as per format enclosed herewith.

The Exchange should ensure before forwarding the application for refund that the member has paid excess over the fees and interest payable by the concerned member to SEBI as per the SEBI (Stock Brokers and Sub-brokers) Regulations 1992 amended as on February 20, 2002 and circular no.SMD/Policy/Cir-07/2002 dated March 28, 2002.

Applications not accompanied by the above mentioned statements duly certified by the stock Exchange shall be returned to the Exchange for resubmission with necessary statements/ details.

Yours faithfully,

PARAG JAIN

Encl : a.a.

FEE LIABILITY COMPUTATION OF MEMBERS

Member’s name :

Member’s trade name :

Member’s SEBI Registration number :

(as appearing on the SEBI Registration certificate)

Name of the Stock Exchange :

Financial Year	Fees on Jobbing turnover, if any	Fees on PSU bonds/ Govt securities turnover, if any	Fees on Other debt market turnover, if any	Fees on Carry-forward turnover less off-setting entries(if included), if any	Fees on Off-market turnover, if any	Fees on Other turnover turnover, if any	Fees payable
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(1)+(2)+(3)+(4)+(5)+ (6)+(7)
	Rs.	Rs.	Rs.	Rs.	Rs.	Rs.	Rs.





						Total Fees Payable Rs.
						Less Fees Paid, if any, Rs
						Balance Fees Payable Rs.

For --------------------------- Stock Exchange

Authorised Signatory

Deputy General Manager
Secondary Market Department

SMD/Policy/Cir-08/2002
April 16, 2002

The President/Executive Director/Managing Director
Of all the Stock Exchanges

Dear Sir/Madam,

This is in continuation of our circular no. SMD/Policy/Cir-03/2002 dated January 30, 2002 wherein we have issued instructions to the stock exchanges that "no delivery period" on account of book of book-closure/record date for corporate action such as issue of dividend and bonus share in respect of the scrips which are traded in the compulsory dematerialised mode shall be abolished.

The stock exchanges have represented that they would be in position to implement this decision by May 1, 2002 since at present they are engaged with smooth transition to rolling settlement on T+3 basis which began on April 01, 2002.

Considering the importance of the smooth transition to the rolling settlement on T+3 basis, it has been decided that stock exchanges would have to implement the decision to abolish the "no delivery period" by May 01, 2002 and no further extension would be granted in this regard.

It was also advised vide our circular dated January 30, 2002 that for implementation of the decision to abolish "no delivery period" any short delivery by any member in the previous settlement where delivery was to be on cum basis can be closed out to the extent of the short delivery if the shares cannot be acquired in auction on cum basis. As per the existing close-out procedure, the mark-up price for such a close-out is 20%. Stock Exchanges represented that since it is a direct close-out, the mark-up price could be reduced to 10%.

In view of the above, it has been decided in case of such direct close-out, the mark-up price would be 10%.

In the circular dated January 30, 2002 we had also advised about the reference price for close out. We have received representations from exchanges that they are conducting the close out at the end of the normal trading and that they should be allowed to use the closing price of that day’s trading as a reference price for the close out.

It has been decided that the reference price for the close out shall be the latest available closing price at the exchange.

You are advised to implement the above decisions.

Yours faithfully,

S.V.MURALIDHAR RAO

DEPUTY GENERAL MANAGER
SECONDARY MARKET DEPARTMENT

SMD/POLICY/ Cir -07/2002
March 28, 2002

The Executive Directors / Managing Directors
All Stock Exchanges
Dear Sir / Madam,

SUB: FEES PAYABLE BY STOCK BROKERS

SEBI has notified the SEBI (Stock Brokers and Sub-brokers) Regulations in 1992. Schedule III of the SEBI (Stock Brokers and Sub-brokers) Regulations 1992 which deals in detail with the payment of the fees was challenged by the brokers of the stock exchanges in their individual and representative capacity. The Hon'ble Supreme Court was pleased to deliver a judgement on February 01, 2001 on this issue inter alia directing SEBI to amend the regulations incorporating the recommendations of the R. S. Bhatt Committee Report.

SEBI has amended the regulations on February 20, 2002 as per the judgement of the Hon’ble Supreme Court incorporating the recommendations of R. S. Bhatt Committee.

It may be mentioned that the incidence of fees payable to SEBI by brokers has been reduced by the R.S. Bhatt Committee. R.S. Bhatt Committee has suggested different rates of payment of fees depending on nature of the transactions entered into. SEBI has accepted the recommendations of the R.S. Bhatt Committee and many brokers have paid fees in the past as per schedule III read down with the recommendations of the R.S. Bhatt Committee and such fees have been accepted by SEBI.

Following the judgement of the Hon'ble Supreme Court, SEBI has received representations from the brokers in their individual capacities as well as their representative capacity. The issues have been examined by SEBI. Part A of this circular contains clarifications on the issues sought by the brokers.

All the stock exchanges are advised to bring the following to the notice of their members :-

That Schedule III of the SEBI (Stock Brokers and Sub-brokers) Regulations 1992 has been amended on 20^th February 2002.
That registration fees payable by the brokers to SEBI should be remitted in conformity with the amended regulations and taking into consideration the clarifications given in Part A of this circular.
That details of various components of the turnover as per the amended regulations should be furnished duly supported by auditors certificate as per format specified in Annexure – A.
That brokers must remit fees to SEBI along with the auditors certificate.
For the purpose of updating SEBI’s computer records, brokers shall be advised to send a soft copy of turnover data in Excel format as per structure specified in Annexure – B along with the hard copy of the auditors certificate.
In case fees paid is less than actual fees payable, the broker shall pay the balance fees upto 50% of the principal fees payable immediately and shall undertake to pay the remaining fees with interest within a period of two years. The format of undertaking is enclosed at Annexure – D.
That a copy of the auditors certificate furnished to SEBI shall simultaneously be forwarded to the Exchange concerned for due verification with their records.

All stock Exchanges are advised that they shall :-

Verify the turnover figures submitted by the members with their own records.
In case of any discrepancy, the concerned Exchange shall settle the same with the members concerned.
In case of any shortfall in fees after reconciliation, the Exchanges shall advise the members concerned to remit the balance fees to SEBI immediately in case the fees paid by the member concerned is less than 50% of the principal fees payable.
The Exchanges shall confirm to SEBI the correct turnover figures of all its members ( including inactive and past members who were registered with SEBI) after due verification. The said turnover figures in both hard copy ( duly certified by the Exchange) as well as soft copy version ( Excel format) financial year-wise, member-wise from 1991-92 to 2001-02 may be forwarded strictly as per format specified in Annexure – C (strictly in the order prescribed).
In respect of members who do not furnish the break-up of total turnover duly certified by the Auditor, the Exchange may furnish the total turnover of such members as per their records, once again, taking into consideration the steps underlined below, even though the said details may have been furnished earlier and there is no change in the turnover reported earlier.

In order to facilitate direct loading of the turnover data in SEBI’s database, the Exchanges are further advised to take the following steps while forwarding the turnover data to SEBI as per structure specified in Annexure –C :

In case of transfer/ conversion/ transmission of membership, the turnover data upto the date of transfer/ conversion/ transmission should be furnished for the transferor along with his SEBI Registration number and the subsequent turnover has to be furnished for the transferee along with his SEBI Registration number.
In case member has ‘Nil’ turnover for a particular financial year in respect of any of the fields, Exchange shall specifically put the figure "0.00" in the said cell while forwarding the data to SEBI and not leave any field blank.
Exchanges are advised to ensure and confirm the correctness of the SEBI registration numbers ( including past members and inactive members) and ensure that no blank space is left between alpha code "INB" & the remaining numeric code.
Exchanges are advised to ensure that summation of the break-up of the turnover under different heads is the same as the aggregate figure for the turnover.

Yours faithfully,

SD/-

PARAG JAIN

Encl:a.a.

PART - A

CLARIFICATIONS ON THE ISSUES ARISING OUT OF THE VARIOUS REPRESENTATIONS ON FEES TO BE PAID BY BROKERS TO SEBI

The issues raised in the representations from brokers with respect to the payment of fees to SEBI are clarified as under:

Reckoning of first five years fees :

It is clarified that the period of first five years as specified in the regulations shall be computed as under :
Brokers who were already carrying on their activities in the financial year 1991-1992 would have to pay the fees for the financial year 1992-93 on the basis of their turnover for the previous financial year i.e. 1991-92. The brokers who have commenced their business from the financial year 1992-93 and onwards, would pay a flat fee of Rs.5,000/- for the first financial year if they have a nil turnover in the preceding financial year. For the next four years, brokers would pay fees based on their corresponding previous financial year’s turnover.
Interpretation of `received' and 'receivable':

In the definition of Annual Turnover as appearing in sub-clause (3) of Regulation 10 of Schedule III of SEBI (Stock Brokers and Sub-brokers) Regulations, 1992, the words 'received' and 'receivable' shall be interpreted as follows:
It is clarified that the words "received" and "receivable" refer to the price of the securities traded and not the securities themselves. Therefore, the words, "receive" and "receivable" cannot be restricted to the securities actually delivered or to transactions which involve the actual delivery of securities.
Thus, turnover shall be computed as aggregate of sale and purchase price of securities received and receivable by the stock broker either on his own account as well as on account of his clients in respect of sale and purchase or dealing in securities during any financial year in conformity with Regulation 10 of Schedule III of the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992.
Jobbing transactions:

The word 'jobbing' shall be interpreted in accordance with Schedule III of the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992 as amended on 20^th February 2002.
The SEBI circular no. SMD/DBA-II/Cir-31/98 dated November 5, 1998 issued in this regard for non-applicability of jobbing to order driven systems stands superceded.
Interest on delayed payment of fees:

Interest on delayed payment of fees shall be computed @ 15% p.a. as under :

As the statutory amendment for payment of interest has come into force from December 16, 1998, the liability to pay interest would be for fee outstanding for the delay beyond December 16, 1998, at the specified rate of 15% p.a.

As per Schedule III, a broker is liable to pay fees on or before October 1^st based on the previous year turnover. For the fees payable for the financial year 1999-2000 and thereafter, the interest shall be payable @ 15% p.a. from October 2^nd of the corresponding financial year.

Payment of fees in cash segment / Registration in derivatives segment :

The SEBI Board at its meeting held on December 28, 2001 had decided that all those brokers who did not pay fees should pay atleast 50% of the principal due in the cash market and give an undertaking to pay the balance fees within a period of 2 years along with interest. The brokers are required to give an undertaking in the format as given in the Annexure C of this circular. The Board further decided that any such member who abides by the above would be granted registration in the derivatives segment subject to the other conditions mentioned in the regulations.
Fees payable by composite corporate members:

It is clarified that Regulations require every broker who wants to receive a certificate of registration from SEBI to make payment of fees to SEBI. This is irrespective of the number of cards which are held by the broker on the stock exchange. In case the broker has more than one registration certificate from SEBI on any stock exchange then he will be required to pay fees as per the Regulations for each and every certificate that he holds. In case the broker holds only one registration certificate and more than one card on any exchange it is clarified that registration fees are payable on the registration certificate and not on the number of cards held by the broker. The brokers' turnover will be the aggregate turnover of all cards.
Fees payable on Government securities and PSU bonds:

Transactions in Government securities, bonds, units, etc. clearly form a part of the turnover and have to be included in the total turnover of the member and will have the benefit of concessional rate as mentioned in Regulation 10, Schedule III of the SEBI (Stock Brokers and Sub-brokers) Rules and Regulations, 1992 as amended on 20^th February 2002.
Applicability of the notification on exemption from fees on corporatisation:

Notification dated January 21, 1998 was issued and the SEBI (Stock Brokers and Sub-brokers) Regulations were amended granting exemption from payment of fee on corporatisation of individual / partnership membership of the Exchange. It has been clarified vide notification dated February 20, 2002 that the amendment which was brought in on January 21, 1998 in respect of conversion of individual or partnership membership card of the exchange into corporate entity shall be deemed to be in continuation of the old entity subject to the condition mentioned in the above notification and no fee shall be collected again from the converted corporate entity for the period for which the erstwhile entity has paid the fees.
The spirit behind notification dated January 21, 1998 was to give benefit of this amendment to stock brokers who have converted their individual / partnership membership into corporate on or after April 1, 1997. Accordingly such stock brokers shall be given the benefit of continuity subject to the satisfaction of conditions mentioned in the notification.
Nomination by a member by an existing member / Transmission of Membership:

Wherever a new registration is required - where it is by virtue of transmission or transfer or any other reason, fresh fees, will have to be paid by the new broking entity.
Membership right acquired in auction purchase:

Where a person 'purchases' the card of another defaulting member, then the said purchaser shall have to seek fresh registration with SEBI and he shall be liable to pay turnover fees like a new member of the stock exchange.

Joining of Individual in Partnership Firm :
Where an individual joins a partnership firm as a partner there is no transfer. The registration would continue to be in the name of the partnership firm although by joining the partnership firm the broker carries on business along with the partners with reference to that very registration.

ALBM and BLESS transactions:

ALBM and BLESS transactions, the new deferral products which were introduced by NSE and BSE, shall also be treated in the same manner as carry forward / badla transactions for the purpose of turnover fees and turnover fees as prescribed for badla / carry forward transactions as per Regulation 10 Schedule III of SEBI (Stock Brokers and Sub-brokers) Rules and Regulations, 1992.

FORMAT OF AUDITORS CERTIFICATE FOR REPORTING TURNOVER

ANNEX - A

Member’s name :

Member’s trade name :

Member’s SEBI Registration number :

(as appearing on the SEBI Registration certificate)

Name of the Stock Exchange :

TURNOVER TABLE

Financial Year	Jobbing turnover (sale side), if any	Jobbing turnover (purchase side), if any	PSU bonds/ Govt securities turnover (two-side), if any	Other debt market turnover (two-side), if any	*Carry-forward turnover, if any	Carry-forward off-setting entry turnover, if any {to be given only if included in (6) }	Off-market turnover (two-side), if any	Other turnover (two-side)	Total turnover
(1)	(2)	(3)	(4)	(5)	(6)	(7)	(8)	(9)	(10)=(2)+ (3)+(4)+(5)+(6) – (7)+(8)+ (9)
	Rs.crore	Rs.crore	Rs.crore	Rs.crore	Rs.crore	Rs.crore	Rs.crore	Rs.crore	Rs.crore

*Carry forward turnover shall include carry forward, renewal, badla, ALBM and BLESS transactions.

FEES COMPUTATION TABLE

Financial Year Fees on Jobbing turnover, if any Fees on PSU bonds/ Govt securities turnover, if any Fees on Other debt market turnover, if any Fees on Carry-forward turnover less off-setting entries(if included), if any Fees on Off-market turnover, if any Fees on Other turnover
turnover, if any
Fees payable

(1) (2) (3) (4) (5) (6) (7) (1)+(2)+(3)+(4)+(5)+ (6)+(7)

Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Total Fees Payable Rs.

Less Fees Paid, if any, Rs

Balance Fees Payable Rs.

Certification by Auditor should also include the following confirmation :-

That the break up into various components of the total turnover is in conformity with Schedule III of SEBI(Stock Brokers and Sub-Brokers) Regulations 1992 as amended on February 20, 2002 and, further,
jobbing transactions reported, are in conformity with Paragraph (1), clause (bb) of Schedule III of SEBI(Stock Brokers and Sub-Brokers) Regulations 1992 as amended on February 20, 2002, i.e. transactions that are reported as jobbing have been squared off during the same day and that such transactions have not been undertaken by the broker on behalf of clients.

ANNEX - B

FORMAT FOR REPORTING THE TURNOVER FIGURES BY BROKERS TO SEBI

Stock Exchange Code	NUMBER(2) e.g.(xx => 01)
SEBI Registration No	CHAR(12) e.g. (INB010034314)
Broker Name	CHAR(70)
Trade Name	CHAR(70)
Jobbing turnover(sale side), if any	NUMBER(16, 04) {in Rs. Crore }
Jobbing turnover(purchase side)	NUMBER(16,04) {in Rs. Crore }
PSU bonds/ Govt Securities turnover(two sided), if any	NUMBER(16,04) {in Rs. Crore }
Other debt market turnover (two sided), if any	NUMBER(16,04) {in Rs. Crore }
Carry-forward turnover, if any	NUMBER(16,04) {in Rs. Crore }
# Carry-forward off-setting turnover, if any	NUMBER(16,04) {in Rs. Crore }
Off-market transactions (two sided), if any	NUMBER(16,04) {in Rs. Crore }
Other turnover (two sided)	NUMBER(16,04) {in Rs. Crore }
* Total Turnover	NUMBER(16,04) {in Rs. Crore }
Name of the Auditor ( if any)	CHAR(70)
Date of Auditors certificate ( if any)	DD/MON/YYYY e.g.(20-MAR-2002)
Remarks	CHAR(100) {Suggestive Remarks}
From Fin Year	NUMBER(4) {e. g. 2000}
To Fin Year	NUMBER(4) {e. g. 2001}

# To be given only if off-setting entries have been included in carry forward turnover

* Total Turnover = Jobbing turnover (sale side) + Jobbing turnover (purchase side) + PSU bonds/ Govt. securities turnover(two-sided) + Other debt market turnover(two sided) + Carry forward turnover - Carry forward off-setting turnover (if included in Carry forward turnover) + Off-market transactions(two-sided) + Other turnover(two-sided)

ANNEX - C

FORMAT FOR REPORTING THE TURNOVER FIGURES OF THE MEMBERS BY EXCHANGES TO SEBI

Stock Exchange Code	NUMBER(2) e.g.(xx => 01)
SEBI Registration No	CHAR(12) e.g. (INB010034314)
Broker Name	CHAR(70)
Trade Name	CHAR(70)
Jobbing turnover(sale side), if any	NUMBER(16, 04) {in Rs. Crore }
Jobbing turnover(purchase side)	NUMBER(16,04) {in Rs. Crore }
PSU bonds/ Govt Securities turnover(two sided), if any	NUMBER(16,04) {in Rs. Crore }
Other debt market turnover (two sided), if any	NUMBER(16,04) {in Rs. Crore }
Carry-forward turnover, if any	NUMBER(16,04) {in Rs. Crore }
# Carry-forward off-setting turnover, if any	NUMBER(16,04) {in Rs. Crore }
Off-market transactions (two sided), if any	NUMBER(16,04) {in Rs. Crore }
Other turnover (two sided)	NUMBER(16,04) {in Rs. Crore }
* Total Turnover	NUMBER(16,04) {in Rs. Crore }
Name of the Auditor ( if any)	CHAR(70)
Date of Auditors certificate ( if any)	DD/MON/YYYY e.g.(20-MAR-2002)
Remarks	CHAR(100) {Suggestive Remarks}
From Fin Year	NUMBER(4) {e. g. 2000}
To Fin Year	NUMBER(4) {e. g. 2001}

# To be given only if off-setting entries have been included in carry forward turnover

Certification by ExchangeWe have verified and reconciled from our records the total turnover figures as furnished by the member for the concerned financial years along with the auditors certificate and confirm that :-

the break up into various components of the total turnover has been certified by the auditor concerned to be in conformity with Schedule III of SEBI(Stock Brokers and Sub-Brokers) Rules and Regulations 1992 as amended on February 20, 2002 and, further,
in case of jobbing transactions reported, the auditor concerned has certified that the figures for jobbing transactions are in conformity with Paragraph (1), clause (bb) of Schedule III of SEBI(Stock Brokers and Sub-Brokers) Regulations 1992 as amended on February 20, 2002, i.e. transactions that are reported as jobbing are squared off during the same day and have not been undertaken by the broker on behalf of clients.

For ---------------------- Stock Exchange

Date:

Authorised Signatory

ANNEX - D

FORMAT OF UNDERTAKING
( To be submitted on Non-Judicial Stamp Paper of value as applicable)

To,

SEBI,
Mumbai.

I --------------------------------------------------------- S/o/D/o/W/o Shri ---------------------------------------------------------------------------------------- resident of --------------------------------------------------------------------------------------------------------

Prop./ Director/ Partner of M/s. ----------------------------------------------------------------, member ---------------------------------- Stock Exchange having SEBI Registration number --------------------------, SEBI Registration date ---------------------- and having its office at --------------------------------------------------------------------------------------------------having appropriate authority to do so do hereby solemnly affirm and state as under :-

That my/ our financial year-wise turnover figures duly certified by the Exchange/ qualified auditor as defined in Section 226 of the Companies Act 1956 from the financial year preceding the financial year of registration with SEBI (including that of erstwhile individual/ partner/ transferor, if applicable) are enclosed in conformity with the Auditors certificate format prescribed by SEBI at Annexure –‘A’.

The details of fees payable based on the same & in conformity with Schedule III of SEBI (Stock Brokers & Sub-Brokers) Regulations 1992 amended as on February 20, 2002 (including fee payable in respect of erstwhile individual/ partner/ transferor, if applicable) and details of fees paid to SEBI is as given below :-

Turnover
Year Fee Year Fees
Payable
Rs. Fees paid
Rs. Instrument
Number Balance Fees
Payable
Rs.

TOTAL

I/ We hereby confirm and undertake to pay arrears of my/ our Registration fees of Rs.-------------- in the cash market shown as above to SEBI as detailed hereunder :-

I/We undertake to pay balance principal amount of Rs. ---------------- ( balance remaining after paying atleast 50% of the principal fees payable) with interest within a period of two years from the date of the undertaking.
In case, fees paid are less than the actual fees payable after verification, I/ We undertake to pay the balance fees upto 50% of the principal fees payable immediately.
I/ We undertake to pay interest computed @ 15 % per annum in conformity with the clarifications given in Part A of circular no.SMD/Policy/Cir-07/2002 dated March 28, 2002 till the date of payment. - on delayed payment of the outstanding principal amount as also on the principal amount which has already been paid.
That the break-up of turnover figures into various components furnished to the Exchange/ SEBI duly certified by a qualified auditor is in conformity with the SEBI (Stock Brokers & Sub-Brokers) Regulations 1992 amended as on February 20, 2002.
That my/ our terminal in the cash as well as in the derivatives segment may be deactivated by the Exchange in case of my/ our failure to pay the outstanding Principal amount with interest within a period of two years from the date of this undertaking .
That SEBI will be at liberty to take such action as it deems fit or as may be permissible under SEBI Act, 1992 and SEBI ( Stock Brokers & Sub-Brokers) Rules & Regulations 1992 in case of my/ our failure to pay the outstanding Principal amount with interest on time.

Declared and affirmed at -------------- on this ------- day of ---------------.Signature of Proprietor/ Designated directors/ Partners

For -----------------------------------------------------

General Manager
Secondary Market Department

SMD/Policy/Cir-06/2002
March 27, 2002

The President/Executive Director/Managing Director
Of all the Stock Exchanges

Dear Sir/Madam,

You are advised to refer to our circular SMDRP/POLICY/CIR-22/99 dated July 9, 1999 wherein it was advised that on receipt of Arbitration Awards, Stock Exchanges were to debit the amount under the award to the security deposit or other monies of the member against whom an award has been passed and amount so debited was to be kept in a separate account. It was also advised that payment was to be made to the awardee only after a confirmation was obtained from the member to the effect that no appeal has been filed by him and in case an appeal had been filed and the same was pending, payment was to be made as per orders of the court.

It has now been decided that for better implementation of the directions contained in the captioned circular, amendments should be made to Bye-Laws, Rules and Regulations of all stock exchanges to incorporate above provisions in the bye-laws, rules and regulations.

You are therefore, advised to prepare and forward draft amendments to the respective bye-laws/rules/regulations for our approval.

Yours faithfully,

P K Bindlish

General Manager
Secondary Market Department

SMD/Policy/Cir- 05/2002
March 26, 2002

The President/Executive Director/Managing Director
Of all the stock exchanges,

Dear Sir/Madam,

It had been advised vide our circular No. SMD/Policy/Cir-4/2002 dated January 30, 2002 that the rolling settlement on T+3 basis would commence from April 01, 2002.

Pursuant to discussions with the exchanges of NSE and the BSE, the following activity schedule has been decided for the exchanges for the T+3 rolling settlement:-

S. No.	Day	Description of activity
1	T	Trade Date
2	T+1	Custodial Confirmation
3	T+3	Securities and Funds pay-in / Securities and Funds pay-out The exact timings of pay-in and pay-out would be specified by the respective exchanges.
4	T+4	Auction of shortages in deliveries
5	Not later than T+6	The auction pay-in and pay-out would be conducted as soon and possible it should not in any case be later than T+6. The exact timings of auction pay-in and pay-out would be specified by the respective exchanges.

There would be overlapping settlements due to trades done on T+5 basis upto March 31, 2002 and the commencement of T+3 rolling settlement from April 01, 2002.

As two settlements would be conducted on a single day, it has been decided that these settlements would be settled separately and would not be clubbed.

The Exchanges are advised to take steps to implement the decisions.

Yours faithfully,

P K Bindlish

cc: 1) The Managing Director
NSDL

2) The Managing Director
CDSL

JANUARY 2002

January 30, 2002

· Circular 4 dated January 30, 2002
January 30, 2002

· Circular 3 dated January 30, 2002
January 10, 2002
Order under Section 8 of Securities Contracts (Regulation) Act, 1956
January 02, 2002

· Amendments to the Listing Agreement

Circulars prior to 1.1.2002

Deputy General Manager
Secondary Market Department
e-mail : ravik@sebi.gov.in

SMD/Policy/Cir-04 /2002
January 30, 2002

The Executive Directors/Managing Directors
All the stock exchanges

Dear Sir/ Madam,

Pursuant to discussion in the meeting of the Group on Risk Management Systems for the Equity Markets which met on December 19, 2001 and with a view to derive benefits of increased efficiency it has been decided to shorten the rolling settlement cycle from the present T+5 to T+3. The compulsory rolling settlement on T+3 basis would commence from April 01, 2002.

The stock exchanges are advised to make the necessary arrangements/ modifications in their systems to implement the rolling settlement on T+3 basis for all listed securities from April 01, 2002.

Yours faithfully

D RAVIKUMAR

Deputy General Manager
Secondary Market Department
e-mail : ravik@sebi.gov.in

SMD/Policy/Cir-03/2002
January 30, 2002

The Executive Directors/Managing Directors
All the stock exchanges

Dear Sir/Madam,

Pursuant to the discussions in the meeting of the Group on Risk Management Systems for the Equity Markets held on August 14, 2001 the following decisions have been taken :

Disclosure of the scrip wise delivery ratio

In the absence of the deferral products and the introduction of the rolling settlement, the information of the open positions required in respect of top 500 scrips as required per circular SMDRP/POLICY/CIR-33/2000 dated July 27, 2000 had become redundant. It has been decided that exchanges would now disclose scrip wise deliverable positions grossed across clients for that day’s trading session in the following format:-

Scrip Wise Delivery Position – Compulsory Rolling Settlement Trade Date_____________ Settlement no ______Settlement Date___________
1	2	3	4	% of column 4 to 3
Sr. no	Name of Scrip	Quantity Traded	Deliverable quantity (Gross across client level)	% of deliverable quantity to traded quatity
1

No delivery period

Vide our circular no. SMDRP/POLICY/CIR-55/00 dated December 06, 2000 it was advised that ‘No Delivery Period’ on account of book closure/record dates for corporate actions such as issue of dividend and bonus shares is being abolished in respect of the scrips which are traded in the compulsory dematerialised mode. The Exchanges had communicated that they were facing difficulties in implementing the no "no delivery" as they required to process auction and then close out in case of short/failed deliveries for the trading periods which were before the book closure/record dates.

It was decided that in case of any short delivery by any member in the previous settlement where the delivery of securities is to be given on cum basis, then the Exchange may closed out to the extent of the short delivery if the shares cannot be acquired in auction on cum basis.

Henceforth, there will be no "no delivery" period on account of book closure/record dates for corporate actions such as issue of dividend and bonus shares in respect of the scrips which are traded in the compulsory dematerialised mode.

Reference price for close out

Vide our circular no. SMD/POLICY/IECG/5548/96 dated December 09, 1996 while advising the exchanges for the standardisation of the close out procedures stipulated that

"The close out Price will be the highest price recorded in that scrip on the exchange in the settlement in which the concerned contract was entered into and upto the date of auction/close out

20% above 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 trading day on which there was an official closing price),

WHICHEVER IS HIGHER."

Since in the rolling settlement the auction and the close out takes place during trading hours, hence the reference price in the rolling settlement for close out procedures would be taken as the previous day’s closing price.

You are advised to take steps for the implementation of the above decision.

Yours faithfully

D RAVIKUMAR

General Manager
Secondary Market Department
Email: pkb@sebi.gov.in

SMD/POLICY/CIR-2/2002
January 10, 2002

The Executive Directors/Managing Directors,
Of all Stock Exchanges.

Dear Sir/Madam,

Please find enclosed a copy of the Order dated January 10, 2002 issued under Section 8 of the Securities Contracts (Regulation) Act, 1956. You are directed to implement the SEBI Board decision by suitably amending your Rules, Articles etc. within two months from the date of the said order.

In case any stock exchange has any query regarding the Order, they may write to us within seven days from date of this circular.

Yours faithfully,

P. K. BINDLISH

Encl: a/a

ORDER UNDER SECTION 8 OF SECURITIES

CONTRACTS (REGULATION) ACT, 1956

The Hon’ble Finance Minister had announced in the Parliament on 13.3.2001 that " corporatisation of stock exchanges by which ownership, management, and trading membership would be segregated from each other. Administrative steps will be taken and legislative changes, if required, will be proposed accordingly." In accordance with the above policy announcement, SEBI had discussed the issue of demutualisation with the stock exchanges from time to time.

SEBI Board, in its meeting dated 28.12.2001 had decided that no broker member of the stock exchanges shall be an office bearer of an exchange i.e. hold the position of President, Vice President, Treasurer etc. This requires amendments to the Rules, Articles etc. of the stock exchanges.

Therefore, in exercise of the powers under Section 8 of Securities Contracts (Regulation) Act, 1956 read with Section 4(3) of Securities and Exchange Board of India Act, 1992, I hereby direct all the recognised stock exchanges to suitably amend its Rules, Articles etc. within a period of two months from the date of this order, to give effect to the decision taken by SEBI Board and the policy decision of Government in this regard.

If any of the stock exchanges fails or neglects to comply with this order within the period specified, SEBI may make the Rules / amend the rules of the concerned stock exchanges in accordance with the provisions of the said Section 8.

This direction shall come into force immediately.

Place: Mumbai
Dated: January 10, 2002

D. R. MEHTA
CHAIRMAN
SECURITIES AND EXCHANGE BOARD OF INDIA

General Manager
Secondary Market Department.

SMD/POLICY/ CIR- 1 /02
January 02, 2002

The Executive Directors/Managing Directors
of all the Stock Exchanges

Dear Sir/Madam,

Sub: Amendments to the Listing Agreement

The SEBI Board in its meeting held on November 01, 2001 approved the modifications to the SEBI (Buy Back of Securities) Regulations, 1998, consequent to the amendment to the Companies Act, 1956. It was also decided to amend the Listing Agreement to ensure transparency and disclosures to the investors on Buy Back of Securities as follows:

Amendment to Clause 19

The companies shall be required to give prior notice of at least 7 days to the stock exchanges about the Board meetings at which the proposal for Buy Back of Securities is to be considered.

Amendment to Clause 20 (Announcements after the Board Meetings)

The companies shall be required to intimate the stock exchanges within 15 minutes of the closure of the Board Meetings about the decision on Buy Back of Securities.

The Stock Exchanges are advised to incorporate the above amendments in the Listing Agreement with immediate effect and confirm the same.

Yours faithfully,

P K BINDLISH

Type of Member

No. registered upto previous month

No. Registered during theMonth

No. disconti-nued during the month

Total No. Registered

Total No. of Active Members

Trading Members

Trading cum Clearing Members

Self Trading cum Clearing Members

Professional Clearing Members

FIIs approved by Exchanges for trading Derivatives