Eligibility of a sub-broker to trade through the Subsidiary Company

Jun 02, 2003
Circulars

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

SEBI/SMD/SE/Cir-20/2003/02/06 June 02, 2003

The Managing Directors and Executive Directors Of all the Stock Exchanges

Dear Sir,

Sub: Eligibility of a sub-broker to trade through the Subsidiary Company. 1. The Stock Exchanges have been allowed to set up subsidiary company to acquire membership rights of other stock exchanges subject to certain conditions vide SEBI circular no. SMD-II/Policy/Cir-37/1999 dated November 26, 1999.

2. As per the conditions mentioned in the circular, the subsidiary company can register only the members of the parent stock exchange as sub-brokers of the subsidiary company and no other client/sub-broker can be entertained by the subsidiary company. Hence, the member has to be eligible to trade on parent stock exchange to be eligible to trade through the subsidiary company as its sub-broker. It was noticed that the necessary provisions in this regard have not been made in the rules, bye-laws and the regulations of all the stock exchanges which have set up subsidiaries. The corresponding provisions have also not been made in the Memorandum /Articles of Association of the subsidiary company.

3. In view of the above, all the stock exchanges which have set up subsidiaries are hereby directed to make the necessary provisions in their rules, regulations and the byelaws as well as in the Memoranda/ Articles of Associations of the subsidiary companies to the effect that the only members eligible to trade on the stock exchange are eligible to trade/ continue to trade through the subsidiary company.

4. The undersigned has been authorised to also direct the stock exchanges to

• a) bring the provisions of this circular to the notice of the member brokers/clearing members of the Exchange and also to disseminate the same on the website for easy access to the investors.

• b) and to communicate to SEBI, the status of the implementation of the provisions of this circular in Section II, item no. 13 of the Monthly Development Report for the month of June 2003.

5. This circular is being issued in exercise of powers conferred by section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with section 10 of the Securities Contracts(Regulation) Act 1956, to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,
P K Bindlish