SECURITIES AND EXCHANGE BOARD OF INDIA
Mumbai, the 3rd October, 2018
SECURITIES CONTRACTS (REGULATION) (STOCK EXCHANGES AND CLEARING CORPORATIONS) REGULATIONS, 2018
No. SEBI/LAD-NRO/GN/2018/41.- In exercise of the powers conferred by sections 4, 8A and 31 of the Securities Contracts (Regulation) Act, 1956, read with sections 11 and 30 of the Securities and Exchange Board of India Act, 1992, the Securities and Exchange Board of India hereby makes the following regulations to regulate recognition, ownership and governance in stock exchanges and clearing corporations and matters connected therewith or incidental thereto, namely:—
Short title and commencement
1. (1) These regulations may be called the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018.
(2) They shall come into force on the date of their notification in the Gazette of India.
2. (1) In these regulations, unless the context otherwise requires, the terms defined herein shall bear the meanings assigned to them below, and their cognate expressions shall be construed accordingly,-
(a) “Act” means the Securities Contracts (Regulation) Act, 1956 (42 of 1956);
(b) “associate” in relation to a person shall include another person:
(i) who, directly or indirectly, by himself, or in combination with other persons, exercises control over the first person;
(ii) who holds control of atleast twenty percent of the total voting power of the first person;
(iii) who is a holding company or a subsidiary company of the first person
(iv) who is a relative of the first person;
(v) who is a member of a Hindu Undivided Family wherein the first person is also a member;
(vi) such other cases where the Board is of the view that a person shall be considered as an associate based on the facts and factors including the extent of control, independence, conflict of interest;
(c) “Board” means the Securities and Exchange Board of India established under the provisions of section 3 of the Securities and Exchange Board of India Act, 1992 (15 of 1992);
(d) “clearing corporation” means an entity that is established to undertake the activity of clearing and settlement of trades in securities or other instruments or products that are dealt with or traded on a recognized stock exchange and includes a clearing house;
(e) “clearing member” means a person having clearing rights in any recognized clearing corporation and includes a clearing member as defined in clause (ae) of sub-regulation (1) of Regulation 2 of the Securities and Exchange Board of India (Stock Brokers and Sub- Brokers) Regulations, 1992
(f) “company” shall mean a company as defined in section 3 of the Companies Act, 2013;
(g) “commodity derivatives exchange” means a recognized stock exchange which assists, regulates or controls the business of buying, selling or dealing in commodity derivatives and option in securities with the prior approval of the Board.
(h) “control” shall have the same meaning as assigned to it under clause (e) of sub- regulation (1) of regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 or any modification thereof;
(i) “governing board” means the board of directors of a recognised stock exchange or a recognised clearing corporation;
(j) “key management personnel” includes a person serving as head of any department or in such senior executive position that stands higher in hierarchy to the head(s) of the department(s) in the recognised stock exchange or the recognised clearing corporation, or any person who directly reports to chief executive officer or to the director on the governing board of the recognised stock exchange or recognised clearing corporation, or any person upto two levels below the chief executive officer or managing director, or any other person as may be identified by its Nomination and Remuneration Committee;
(k) “netting” means the determination by clearing corporation of net payment or delivery obligations of the clearing members of a recognised clearing corporation by setting off or adjustment of the inter- se obligations or claims arising out of buying and selling of securities, including the claims and obligations arising out of the determination by the clearing corporation or stock exchange, on the insolvency, winding-up, liquidation or resolution of any clearing member or trading member or client or such other circumstances as the clearing corporation may specify in its bye-laws, of the transactions admitted for settlement at a future date, so that only a net claim be demanded, or a net obligation be owed;
(l) “novation” means the act of one or more recognised clearing corporations interposing between the parties of every trade, so as to be a legal counterparty;
(m) “persons acting in concert” in the context of acquisition or holding of shares or voting rights or control shall mutatis mutandis have the same meaning as assigned to it in clause (q) of sub-regulation (1) of regulation 2 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 or any amendments thereof;
(n) “public” includes any member or section of the public but does not include any trading member or clearing member or their associates and agents;
(o) “public interest director” means an independent director representing the interests of investors in securities market and who is not having any association, directly or indirectly, which in the opinion of the Board, is in conflict with his role;
(p) “recognised clearing corporation” means a clearing corporation which is recognised by the Board under section 4 read with section 8A of the Act;
(q) “recognised stock exchange” means a stock exchange which is recognized by the Board under section 4 of the Act.
(r) “regulatory department” means a department of a recognised stock exchange or a recognised clearing corporation which is entrusted with regulatory powers and duties and includes such department as may be specified by the Board;
(s) “rules” means the Securities Contracts (Regulations) Rules, 1957;
(t) “shareholder director” means a director who represents the interest of shareholders, and elected or nominated by such shareholders who are not trading members or clearing members, as the case may be, or their associates and agents;
(u) “trading member” means a person having trading rights in any recognized stock exchange and includes a stock broker.
(2) Words and expressions used and not defined in these regulations but defined in the Act, the Companies Act, 2013, the Securities and Exchange Board of India Act, 1992, the Depositories Act, 1996 or any rules or regulations made thereunder shall have the same meanings respectively assigned to them in those Acts, rules or regulations made thereunder or any statutory modification or re-enactment thereto, as the case may be.
RECOGNITION OF STOCK EXCHANGES AND CLEARING CORPORATIONS
Obligation to seek recognition
3. No person shall conduct, organise or assist in organising any stock exchange or clearing corporation unless he has obtained recognition from the Board in accordance with the Act, rules and these regulations:
Application for recognition
4. Subject to compliance with the provisions of Act, rules and these regulations, an application for recognition as a stock exchange shall be submitted to the Board in Form A as prescribed under rule 3 of the rules and an application for recognition as a clearing corporation shall be submitted to Board in Form A as specified in Schedule – I of these regulations.
Fee for application
5. An applicant seeking recognition as a stock exchange shall pay the application fee in terms of rule 4 of the rules and an applicant seeking recognition as a clearing corporation shall also pay the application fee as payable by a stock exchange.
Documents and particulars for application
6. An application for recognition as a stock exchange or a clearing corporation, as the case may be, shall be accompanied by the copy of the memorandum of association, articles of association, bye-laws and other documents as provided in sections 3 and 4 of the Act, rule 5 of the rules and these regulations.