Association of National Exchanges Members of India

Presentation to National Stock Exchange

July 30, 2014

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ANMI Representation to NSE

A. Business Development Issues

Issues Observations Suggestions

Introduction of e- KYC

It will act as comprehensive platform

for the Investors which will help them

mapping KYC documents &

requirements electronically.

The investors can open Trading

Account by submitting paper

documents in digital format in secured

way.

We suggest introducing e-KYC. Inter

alia, it will help in the following:

No Physical documents

Reduced TAT

Account Opening at Remote Locations

Secured & will have privacy

Annexure Attached- A

Margining of Options Indian options market is extremely

skewed with a vast majority of the

liquidity and volumes only in NIFTY

options.

The concept of value-at-risk should be

used in calculating required level of

initial margins.

While the SPAN margin method

captures the portfolio risk, the Short

option minimum charge specified,

essentially renders the SPAN

calculations redundant in a vast

majority of cases. This is due to the

fact that the short option minimum

levels have been set extremely high.

The short options minimum is

inconsistent with Future margin

requirements, thus leading to incorrect

overall portfolio margin.

We suggest the SOM be reduced to

1% for indices and 2% for stock

options.

Annexure Attached-B

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Brokerage on Expiry Trades

In case of auto expired in-the-money

Options contracts, while STT is

allowed to be charged, brokerages are

not allowed.

As the broker does all the work related to

these trades like issuance of bill/reports to

customer, collection/payment of MTM

based on those trades etc. We advise that

brokerage on these trades should also be

permitted.

B. Compliance Issues

Issues Observations Suggestions

Trading Terminals and Approved Users

As per extant SEBI regulations, the

trading terminals can be installed only

at the broker’s head office, branch

office, sub broker or authorized

person’s office. The physical location

details of the trading terminal should

be intimated through the interface

provided by the exchanges.

It will not be feasible for the Broker to

check this compliance from a central

location as the dynamic IP address of

all such trading terminals will not allow

any central monitoring of the physical

address of such internet connected

trading terminals.

Periodic onsite audits covering 10 % of

the active sub brokers/ authorized

persons will continue as is done today

but it can never ensure 100%

assurance with this compliance

requirement which was relevant when

connectivity was based on leased

lines/ VSAT.

In the era of Internet, this requirement

may no longer be relevant or

practically feasible. Hence, we suggest

that this requirement should be done

away with.

Annexure Attached-C

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Client Running Balance beyond 5 days Debit balance continuous for 5 days

(beyond T+5) is treated as temporary

margin funding.

The threshold minimum may be made

as 1 lakh per client for this requirement

- similar to client funding upload.

In case where debit is more than Rs. 1

lakh, but the collateral is more than

sufficient, then debit may be allowed.

In any case, quarterly settlement

system prevails.

Self Trade Issue wrt Multiple Pro Account Ids

The business model of many

proprietary trading brokerages is to

employ a large number of traders,

each of whom is given a terminal and

a unique user ID as per exchange

requirements.

A large number of pro account

brokerages have deployed algo based

trading for high frequency as well as

arbitrage. These are also conducted

by traders using their trading interface

to enter parameters.

Therefore, there are a large number of

traders/user ids, all being operated

independently but under the pro code

of the broker.

In the case of members with many traders

trading using the pro account, it is entirely

possible that the trades have taken place

between these traders (user ids), though

on the exchange. However, as each of

these traders in on pro account, the trade

belongs to the same member.

We appeal NSE to take this issue with

SEBI and request them to consider the

‘User ID’ as the point of analysis for

calculating “self trades” instead of the

‘member ID’. Otherwise incidental activity

of “self trades” will be construed as unfair

trade practice.

There is an urgent need to resolve this

matter as it could lead to a virtual halt of

pro account trading by members.

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C. Cost Issues

Issues Observations Suggestions

Interest on Deposits with Exchange

Members Deposits lying with the

Exchanges do not carry any Interest.

We request that the Deposits be

treated at par with Additional Base

Capital and interest be passed to

members at the prevailing Bank Rate.

This measure will help in setting off

certain additional costs which the

members have incurred in recent years

due to increased regulatory compliance

and falling margins.

Alternatively, the same may be

replaced with Bank Guarantees.

Reduction in Transaction Costs The Transaction Costs have not been

reduced for a considerable period of

time.

We request for reduction in the

transaction costs, especially in Options

Segment. Cross Subsidy from other

new segments may be provided to

encourage the member to take up

membership of new segments and

encourage participation.

High Penalties We request for reduction in the penalties.

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D. Other Issues

Issues Observations Suggestions

Arbitration Reforms Clients default at one broker and trade

at another.

Members are obliged to report the

same to the stock exchanges.

If broker trades with defaulter, it is

considered violation of code of

conduct.

Voice recording is not mandatory but it

is observed that in many cases

absence of voice recording is taken

against the member during arbitration.

In cases where clients lose at

arbitration against the broker, we

request NSE to debar such clients

from further trading with any broker,

adjust the dues if available with other

broker (details available in UCC

database), prohibit the client from

directly or indirectly trading through the

exchanges till such time the client

deposits the award money in an

escrow account. The funds may be

released or impounded based on the

verdicts obtained in the appeal forums

available to the client.

Non-production of voice recording

should not be held against the member

as member is able to furnish other

evidences.

Monthly / Quarterly Settlement of funds

and securities

Easily done by banks (3 in 1

accounts), difficult for others.

Clients do not come back.

Inconvenience to clients.

Statement at odd times.

FDR created out of client funds not

allowed.

Half yearly and Annual Option may be

introduced.

We request to waive off requirement

for quarterly settlement for amounts

below Rs. 1 lakh.

If member chooses calendar quarter

statements, then settlement statement

need not be sent.

We suggest, FDR created out of client

funds should be free from settlement

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obligations if a clear Audit Trail is

available attributable to each FDR.

Internet trading statistics Stock brokers are required to manually

confirm the exchange figures every

day.

We are of the view that since

Exchange already has those numbers;

the requirement of individual

confirmation may be done away with

as it leads to duplication.

PAN number compulsory Currently PAN is compulsory (except

Sikkim)

Leaves out a lot of the population like

villages (a huge roadblock for financial

inclusion).

We suggest that where a person has

AADHAR, PAN should be made

optional for such persons (subject to

declaration that client does not have

PAN at all) & subject to investment of

Rs. 2.5 lakh. The same may be

monitored by depositories using

AADHAR data.

Rectification of Trade Error beyond online

modification deadline.

Online trades moved to ERROR

account. If errors are discovered after

market close, what to do?

We advise to allow movement to

ERROR with due noting in ERROR

register, for errors discovered post-

market hours. Any movement to

ERROR account is anyway free of

penalty.

Post market errors to be reported in

Internal Audit Report and checked

during Inspection.

Such Errors to be reported to

exchange before Pay in.

Pledging of Securities as Collaterals

All the custodians charge heavily

(0.04%) for creation and removal of

pledge (mostly in terms of percentage

of volume) in addition to the charges

levied by depositories.

The trading members that are also

depository participants should be

allowed to pledge securities directly

from their own DP accounts to the

clearing corporation. Pledging

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securities from TM’s own account does

NOT pose any additional threat to the

system.

Request to reduce Custodial charges

to Rs. 5 per transaction, until

implementation of above suggestion.

Acceptance of type of Collaterals

Government bonds, FMPs, MF units,

NSE listed debentures of A-group

companies, tax free listed bonds etc.

are not allowed as collateral.

We request the Exchange to approve

these as collateral. An early approval

of this will provide much needed

financial flexibility to members.

Fungible Collaterals

Currently, brokers are having online

facility for the transfer of FDRs from

one segment to the other segment but

not for Securities.

We advise that online facility be

provided to the brokers for the transfer

of collateral security from one segment

to the other.

Self Auction facility In case of internal trade position, self

auction facility is required.

We request for Self Auction facility in

NSE.

Internal Audit Separate Reports for all Exchange

Segments.

We request that a common format be

worked out for reporting at all

exchanges.

Net worth Certificates We request the exchanges to develop

a uniform format for net worth

certificates. Common criteria for net

worth calculation may be used.

UCC Data Management

Every exchange & depository has its

own set of data formats and separate

rules for UCC file uploads /

modification. E.g. State & Pin codes

masters are separate for each

exchange thereby for a single

customer data has to be managed and

uploaded in 3-4 different formats which

We request for a unified format.

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can easily be unified.

Further, data modification is also

permitted by some exchanges and

other exchanges do not allow changes

easily or have different rules for the

same.

We request for a set of common rules

in the interest of members.

System Audit

System Audit Report has been made

very complicated and lengthy.

We request that System Audit Report

should be common and made very

easy with all exchanges.

MFSS MFSS has some operational issues. The payin should be allowed to be

done from broker pool itself for any

redemption request of the client

instead of client beneficiary. Units

should be treated in demat settlement

wise in same manner as equity shares

for the settlement of constituent trades.

NEAT System It is run on age old system of turnover

control method.

We suggest that NEAT system should

have risk checks based on current

parameters of SEBI.

Corporate ID and FTP passwords Corporate ID and FTP passwords are

same which is a serious security issue

for brokers as different people have

different uses for each service within a

broker organization. The member

portal is given but it does not work in

the morning most of the times. Even it

connects; it is too slow to practical

work.

We suggest that member portal be

upgraded and different levels of

password security should be

configurable by brokers based on their

staff functioning.

CDS margin file issue In CDS segment both the margins are

mandatory for reporting and must be

collected on T day as per last margin

We request that members be allowed

to collect the increased margin i.e.

(EOD minus BOD margin) on T+1 day.

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file of T day which is normally provided

by NSE around 6 to 7 PM. It becomes

very difficult for members to collect

margin after 7 PM.

ANNEXURE- A

E-KYC/ Green KYC

What is Green KYC ?

• Green KYC is the next generation KYC platform for managing KYC electronically.

• Green KYC management is focused on addressing the key requirements & challenges

faced by the Investors during account opening.

• Green KYC provides comprehensive platform for the Investors which will help them

mapping KYC documents & requirements electronically.

• The investors can open Trading Account by submitting paper documents in digital format

in secured way.

Advantages of Green KYC

1) No physical documents

Green KYC will useful for Investors to open trading account using electronic

copy of their proof of identity, address & income in digital format.

2) Reduced TAT

Green KYC will open doors to innovative service provision for the Investors as a

hassle free system which will reduce TAT for Account Opening Process.

3) Account opening at Remote Locations

Digital devices such as Tablet PCs, Smart Phones, or Laptops along with

limited Internet connectivity this service can be extended across PAN India even

at remote locations which will help investors to open Trading Account easily.

Security & Privacy – Green KYC

1) Green KYC is instantaneous, totally secure & this will also enhance Privacy of data of

the Investors.

2) All Proofs for account opening will be digitally Scanned by the portable devices including

the photo identity proofs & stored using digital certificates.

3) Clients will sign the KYC form using Wet Signature using portable digital equipment this

will store clients signature in digital format.

4) This Process will also act as IPV which will help in :-

Customer Validation

Audio/Video consent can be taken at the time of account opening

It will reduce frauds at great extent

5) Green KYC in collaboration with UIDAI E-KYC will play a significant role in client

authentication.

Process Flow of Green KYC :-

1) The sales person will launch the Green KYC application on his digital equipment

2) The sales person will select the documents the customer need to provide against the

required list.

3) The sales person will captures the images of the documents.

4) The sales person will ask the Investor to sign the document on the digital instrument

itself or on separate paper and the document can be uploaded

5) The Green KYC app will attach the signature to the documents & Application form.

6) The system will generate the application reference number of the Investor to tag the

KYC form in the system.

7) The application once submitted from the Sales person synchs the data back to

the central application for back office processing.

Account Opening of Green KYC :-

1) Investor will confirm his willingness to open trading account based on that sales

executive will be assigned.

2) Sales person will intimate Investor the checklist of documents required to open

Trading Account & ask him to be ready with those documents.

3) The sales person will fill up the KYC application form of the investor he will

capture the images of the documents, signature, photo of the Investor on digital

device. Ref number will be sent to the Investor through SMS & email.

4) After the Backend KYC Validations Investors trading account will be generated &

intimation will be send to customer.

ANNEXURE- B

Factors detrimental to the growth of Stock options for hedging and investing

Introduction

The Indian options market is touted as a very large, liquid options market. The reality however is

that the Indian options market is extremely skewed with a vast majority of the liquidity and

volumes only in NIFTY options. The single stock options market remains without depth and

liquidity and has not grown as would be expected from a mature market.

Stock options are a very important tool for both investment and portfolio hedging and are

actively used by investors and market participants globally. Access to stock options enables

investors to mitigate stock specific risk as opposed to simply broad market systematic risk by

the use of Index options.

This paper discusses the factors that partially attributed to lack of growth of stock options in

India and offers suggestions on change.

Margining of options in India

Dr. L.C Gupta Committee had recommended that the level of initial margin required on a

position should be related to the risk of loss on the position. The concept of value-at-risk should

be used in calculating required level of initial margins. The recommendations of the Dr. L.C

Gupta Committee have been a guiding principle for SEBI in prescribing the margin computation

& collection methodology to the Exchanges. The margining methodology specified is consistent

with the margining system used in developed financial & commodity derivative markets

worldwide.

A portfolio based margining approach which takes an integrated view of the risk involved in the

portfolio of each individual client comprising of his positions in all Derivative Contracts i.e. Index

Futures, Index Option, Stock Options and Single Stock Futures, has been prescribed.

The worst scenario loss are required to be computed for a portfolio of a client and is calculated

by valuing the portfolio under 16 scenarios of probable changes in the value and the volatility of

the Index/ Individual Stocks. The options and futures positions in a client’s portfolio are required

to be valued by predicting the price and the volatility of the underlying over a specified horizon

so that 99% of times the price and volatility so predicted does not exceed the maximum and

minimum price or volatility scenario. In this manner initial margin of 99% VaR is achieved. The

specified horizon is dependent on the time of collection of mark to market margin by the

exchange.

The probable change in the price of the underlying over the specified horizon i.e. ‘price scan

range’, in the case of Index futures and Index option contracts are based on three standard

deviation (3σ ) where ‘σ ’ is the volatility estimate of the Index. In case of option and futures on

individual stocks the price scan range is based on three and a half standard deviation (3.5 σ)

where ‘σ’ is the daily volatility estimate of individual stock.

We highly endorse the portfolio risk approach to calculating margin requirements and laud the

regulators and exchanges for introducing the SPAN margining methodology in India.

In addition, for Index Futures and Stock futures it is specified that a minimum margin of 5% and

7.5% would be charged. This means if for stock futures the 3.5 σ value falls below 7.5% then a

minimum of 7.5% should be charged. This could be achieved by adjusting the price scan range.

In a portfolio of futures and options, the non-linear nature of options make short option positions

most risky. Especially, short deep out of the money options, which are highly susceptible to,

changes in prices of the underlying. Therefore a short option minimum charge has been

specified. The short option minimum charge is 3% and 7.5 % of the notional value of all short

Index option and stock option contracts respectively.

In the above guidelines, while the SPAN margin method captures the portfolio risk, the Short

option minimum charge specified, essentially renders the SPAN calculations redundant in a vast

majority of cases. This is due to the fact that the short option minimum levels have been set

extremely high.

Let us carefully examine the short option minimum levels from several angles:

- The minimum margin for Stock futures is 7.5% - which, as mentioned above, sets a minimum

3.5σ value, which makes sense. However if every short option position is also set at 7.5%, then

essentially every short option position is being treated as if It were a futures contract –

regardless of how out of the money or in the money the option is. The purpose of the short

option minimum, as clearly stated above, is to set some margin value for deep out of the money

options. By setting the short options minimum so high, it equates deep out of the options as

having the same risk as deep in the money options. This completely makes the SPAN

methodology redundant and thus is not following the original Dr. L.C Gupta Committee

recommendation that margining should be done based on risk of loss on the position by actually

valuing the positions under various scenarios.

- The short options minimum is inconsistent with Future margin requirements, thus leading to

incorrect overall portfolio margin, This, once again contradicts the Dr. L.C Gupta Committee

recommendation in which it is clearly stated that an integrated view of entire risk of a portfolio of

futures and options should be used.

- Hedged positions and options strategies are being penalized and charged far greater margin

than the risk of the position. This is best illustrated by a few examples:

Covered call position: Assume a long futures position against which an investor has sold a

slightly out of the money call option. The long futures position alone requires 7.5% margin.

However due to the short option minimum, the futures plus option combined position requires

15% margin. This is in spite the fact that the covered call position is no more risky than a simple

futures position – in fact it has slightly less risk. This would be seen clearly from any scenario.

Yet the margin required is double.

A Bull or Bear Spread. Assume a simple Bear spread on a stock like INFY, e.g. Investor Sells

3200 Call and Buys 3300 Call.

The absolute maximum risk of this position is Rs 100, or approx. 3%. Under no scenario can the

investor lose more than 3%. This is exactly what the SPAN risk simulations would show. Yet the

investor has to put up 7.5% margin for this position.

Now consider the Bull spread version – investor Buys 3200 Call and Sells 3300 Call for net cost

of Rs 25. Under no scenario can the investor lose more than the net premium of Rs 25, which is

0.80%. This is exactly what the SPAN risk simulations would show. Yet the investor has to put

up 7.5% margin for this position.

o A Conversion trade: A conversion is a fully riskless position E.g. Buy Stock Future, Sell Calls

and Buy Puts (of same strike). The position has no market risk whatsoever. This will clearly be

seen in the risk simulation of SPAN. Yet the holder of such a position has to put up a whopping

15% margin!

As is clear, the investor and trader is getting highly penalized by the short option minimum and

in all cases the short option minimum effectively overrides and renders the SPAN margin totally

redundant. In all these cases, the SPAN risk scenarios would correctly identify the risk, but the

short option minimum completely overrides it.

- Dr. L.C Gupta Committee states that the margining methodology specified is consistent with

the margining system used in developed financial & commodity derivative markets worldwide.

However the setting of such a high short option minimum actually makes this statement untrue,

as the in a vast majority of positions, the risk based margin calculations are being tossed aside.

This can also be seen from comparing the short option minimum from other exchanges around

the world where SPAN margin system is being used:

Exchange Product SOM (in %)*

NYSE Liffe Equity options 0.20%

ICE Futures Commodity futures options

1.00%

CME Gold Gold futures options

0.04%

CME Energy Energy futures options

0.06%

HKEX HIS HIS Index options 1.20%

ASX Equity options 0.02%

TAIFEX Equities Equity options 0.02%

TAIFEX GOLD Gold futures options

0.02%

OCC* US Equity Options 0.75%

*Note: in all of the exchanges the SOM is a fixed value per contract. The percentage is

calculated using an average price for the stock or commodity. The OCC uses TIMS, not SPAN,

but it is similar in approach.

As is clear, in all implementation of portfolio risk based margining globally, the SOM is a

relatively small number, keeping in line with the purpose of it providing a small minimum margin

for deep out of the money options.

The excessive Short option minimum is thus a huge impediment to the increased use of options

by investors. The margin requirement can easily exceed the actual risk and in some cases

exceed the worst case possible risk of a portfolio.

Recommendation

Our recommendation for the Short option minimum is as follows:

- Reduce the SOM to 1% for indices and 2% for stock options. While still high, this will at least

bring it in line.

- The current Dr. L.C Gupta Committee recommendation states: “In addition, for Index Futures

and Stock futures it is specified that a minimum margin of 5% and 7.5% would be charged. This

means if for stock futures the 3.5 σ value falls below 7.5% then a minimum of 7.5% should be

charged. This could be achieved by adjusting the price scan range”

We recommend that this be revised to: For Index Futures AND OPTIONS, the minimum price

scan range should be 5%, thus if the 3.5 σ value falls below 5%, then 5% should be used. For

Stock Futures AND OPTIONS, the minimum price scan range should be 7.5%, thus if the 3.5 σ

value falls below 7.5%, then 7.5% should be used.

This will make the calculation of risk consistent for futures and options. We believe that the

original intent of the committee was to set the minimum price scans for options to 5%/7.5%

respectively in order to capture the risk of deep out of the money options, as opposed to setting

those as the margin rate based on notional.

ANNEXURE- C

Trading Terminals and Approved Users

Regulation: As per extant SEBI regulations, the trading terminals can be installed only at the broker’s head office, branch office, sub broker or authorized person’s office. The physical location details of the trading terminal should be intimated through the interface provided by the exchanges.

Background: Most of the trading terminals used across the country today use the Intermediate Message Layer (IML) or the Computer to Computer Link (CTCL) by which brokers can use their own trading front–end software in order to trade. Due to the expansion of the branch and franchisee network across the country the exchanges allowed brokers to set up their own network of trading terminals where the broker’s server is connected to the server of the exchange through Internet/ Leaseline / VSAT.

Details of contravention: Location of terminal at a place other than the main / branch office and the offices of the registered sub brokers/ authorized persons of the member will attract a financial penalty of Rs.50000/ - per terminal.

Connectivity:

1. Internet is, by far, the preferred mode of connectivity across most sub broker terminals because of the minimal infrastructure requirements and low costs of setting up an internet based trading terminal. Terminals which are connected on the internet have a dynamic IP address unlike a leased line or VSAT connection which has a static IP. Though Sub Brokers and Authorised persons register their address at the time of registration , use of internet data cards / wi-fi connections from alternate locations( other than their registered address) such as home or other work place, is a reality because Internet connectivity cannot be restricted to a fixed location. Leased line and VSAT connectivity is not a feasible option for sub brokers/ authorised persons as they are very expensive and require significant enhancement in office infrastructure.

2. Additionally, ISP service providers such as BSNL, MTNL, and the private ISP players etc are not willing to provide fixed IP address for so many trading terminals across the country, even at a cost. The Broker is severely constrained in setting up any central mechanism to monitor and control the log in of trading terminals from a location that can only be the registered address of the terminal reported to the Exchange.

3. It is pertinent to note that Internet based trading terminal provided directly by NSE called NOW, also does not have any control mechanism to restrict the physical location from where the trading terminal is used.

Recommendation: It will not be feasible for the Broker to check this compliance from a central location as the dynamic IP address of all such trading terminals will not allow any central monitoring of the physical address of such internet connected trading terminals. Periodic onsite audits covering 10 % of the active sub brokers/ authorized persons will continue as is done today but it can never ensure 100% assurance with this compliance requirement which was relevant when connectivity was based on leased lines/ VSAT. In the era of Internet, this

requirement may no longer be relevant or practically feasible. Hence, we recommend this requirement should be done away with.

Additional Points SLBM Fees:

The Income tax has added all the Borrowing Fees paid to NSCCL by clients in the SLBM Segment

since no TDS was deducte .There is no clarity as to under which section it is to be paid and deduction

for which recipient. We do not know the end beneficiary since the sum is disbursed by the clearing

house to the lenders of stock.

SLBM Collateral:

Though SEBI has permitted to give approved stocks as collateral in the SLBM segment, exchanges

are not implementing the circular. This involves higher cash deployment of the client who borrows the

shares.

Adjustment of SLBM shares against short delivery in regular settlement:

The settlement of SLBM shares payout be done before pay in time of regular settlements so that

shares can be delivered against the members obligation. Currently, it is happening after pay in time.

Daily Margin Statement:

The Daily Margin statement introduced in 2008 in cash segment has become redundant since it only

indicates the Var and ELM Margin, which no client pays. It normally reaches the client after the

settlement of Funds and stocks has been done.

Monthly Funding Statement:

The Monthly Funding statement introduced in 2004 needs to be done away with since Stock

exchanges have permitted to keep Brokers to keep outstanding for 5 days and this amounts to

temporary funding by default . Hence, there is no need to give a report to stock exchange to indicate

peak funding of the broker during the month.

Multiple Client Bank Accounts for different segments and Exchanges:

Exchanges have to be brought along on the concept of one Client Bank Account for all segments .The

need for different Pool Account for CDSL and NSDL will remain since not all scrip’s are available on

both the depositories since many companies have offered demat of their shares either with a single

depository or both. Moreover with the common contract note, the clients will always give one cheque

and will not be exchange or segment centric.

Impact of Taxes and Treatment of Gains and Losses on new Products :

Before any product is introduced by the exchange, the tax effect of the same should be made clear.

Tax would involve Service tax, TDS , Stamp Duty and treatment of Income as per IT Act ,Even today,

the State Government are clueless about Stamp Duty for currency Turnover (even BOISL portal does

not show turnover of currency segment ).

Budget relief under Sec 73:

There is confusion of exemption available in the recent Budget under Sec 73 . The clause says that it

is available for Companies having Income from Investments to those whose principal Business is

Investments. The Exchange and SEBI should jointly make representation to Finance Ministry that it is

available to Stock Brokers.

Alerts on Order spoofing:

The Exchange needs to curtail the alerts on order spoofing (this forms the bulk of the alerts) as clients

will always put to buy or sell at lower rate away from the market price. Alerts should only be generated

if orders are put beyond 20% of the Last Traded Price.

Annexure of Contract Note with weighted average Prices:

The Contract Note can be sent with weighted average price of all trades for single scrip. In addition to

this, a detailed annexure of all the trades have to be sent to the clients defeating the purpose of the

consolidated trades contract note . It is suggested to keep the details of the trades on the web site of

the Broker under respective client login or allowed to be sent in E Mail even though the Customer has

not opted for a Digital contract but has provided a E Mail ID.

AP Cancellation Process:

The AP Cancellation Process involves a declaration that no case or complaint is pending against the

AP. A Broker's information is limited to the complaints received by him or any pending Arbitration

issues. The wordings involve the declaration for cases which may be filed at local level for which the

Broker is not made a party and not aware of. The declaration should therefore specifically use the

words "with the Broker”.

Permitting non defaulting clients to participate in Auction Process :

Currently, even if one share of any scrip remains undelivered , the clients of the broker are not

permitted to participate in Auction . This should be done away with and clients should be allowed to

participate in the Auction process.

Model Policies:

The exchange should put up Model Policies on the Web site which the Members can adopt and

should be treated as deemed compliant by the Exchange during Inspection.

Quarterly Payout of Securities:

Shares kept with Exchanges or Professional Clearing Members should be allowed to be delivered to

clients within 2 days of the Payout Cut off date. These shares once identified to be returned to client

needs to be called from the exchange or the PCM which involves at least 2 working days. Shares

lying in Margin and Beneficiary Account can be delivered on next working day or on same day.

Currently, the view taken is that all payout has to happen on same day, which is not feasible for such

scenarios.