OTCEI

1.1 Unless in the context it is explicitly stated otherwise, all words and expressions used herein but not defined and defined in the following, shall have the meanings respectively assigned to them therein:

1.2 In case a term is defined in more than one acts then its meaning as defined in that act or statute which precedes in the above order shall prevail, unless in the context it is explicitly stated otherwise.

1.3.1. �Board/Board of Directors� means the persons appointed as Directors of OTCEI as per Articles of Association of the Company.

1.3.2. �Committee� means various Committees appointed by the Exchange in accordance with the provisions of the Articles of Association of the Company.

1.3.3 �Constituent� means a person, registered or not, who can deal through the Member, Dealer or any other entity registered with the Exchange for the purchase or sale of any security or does any act in relation thereto. Such constituent, if registered, would have to comply with the Business Rules, directives and guidelines applicable for the registered entities under the relevant trading segment of the Exchange. ¹

1.3.4 �Counter� means a counter operated by a Member/Dealer to facilitate trading and to render services to the investors.

1.3.6 �Dealer� means an individual or a body corporate appointed in accordance with Chapter IV(1)(a).

1.3.7 �Dealing� means and includes transacting, trading, borrowing, lending, raising funds and any other related activities. ¹

1.3.8 �Issuer� includes a sovereign entity (central/state government), a body corporate or any other entity - whether incorporated or not, which issues any security(ies) or other instrument(s) or draws or accepts negotiable instruments which is/are admitted to dealings on the Exchange. ¹

1.3.9 �Market Maker� means a Member/Dealer who undertakes market making.

1.3.10 �Market Making� means making market in the securities listed on the Exchange with a view to facilitate trading by offering two-way quotes viz., buy and sell quotes.

1.3.11 �Member� means a body corporate appointed in accordance with Chapter III(1)(a).

1.3.12 �Official List� means the list of securities admitted for dealings on OTCEI.

1.3.13 �OTC Exchange of India/OTCEI/Exchange� means the Exchange operating the OTC stock market.

1.3.14 �OTC� means �over the counter� stock market operated by OTC Exchange of India.

1.3.15 �OTCEI securities/Exchange securities� means all marketable / tradable / negotiable securities which are listed / permitted / admitted / introduced for the purpose of dealings under the various trading segments of the Exchange. ¹

1.3.16 �Quotation System� means a system which makes available to the Members/Dealers/Sponsors and the investing public, by whatever method, quotations in OTCEI securities and disseminates information regarding trades/deals effected, volumes, turnover, etc., and such other notifications/announcements as may be placed by the Exchange authorities.

1.3.17 �Relevant/Authorised Authority� means the OTC Committee/Board of OTCEI/ Managing Director of OTCEI or such other authority as specified by the Board from time to time as relevant for a specific purpose. ¹

1.3.18 �Rules� mean Business Rules, regulations, any other rules and regulations as may be framed by OTCEI from time to time for the constitution, organization and functioning of the Exchange and shall be subject to the Securities Contracts (Regulation) Act, 1956 and Rules and SEBI Act, 1992.

1.3.20 �Security/(ies)� shall have the meaning assigned to it in the SCRA, 1956 and shall also include OTCEI securities/Exchange securities. ¹

1.3.21 �Security(ies) admitted to dealings� means and includes a security which is/are listed / permitted / admitted for trading on the Exchange. ¹

1.3.22 �Segments/Trading Segments� means the different markets or trading segments operating on the Exchange from time to time and comprising such securities as may be classified, categorised and specified by the relevant/authorised authority from time to time. ¹

1.3.23 �Shareholders� means the holders of shares of OTC Exchange of India as defined in the Articles of Association of the Company.

1.3.24 �Sponsor� means the entity appointed by OTCEI as a �Sponsor� (entity different from the Member) who is a Merchant Banker registered with SEBI.

¹ Inserted by the Board of Directors Resolution dated September 25, 1998 and approved by SEBI on November 20, 1998.

(For the purpose of these Bye-laws, the term �Member(s)� includes

�Member(s), �Dealer(s)� and �Sponsor(s)� or any other entity as may be registered by the Exchange from time to time wherever the context so admits.)

The OTC Committee shall be appointed by the Board of Directors with a total strength of fifteen (15) members and shall comprise of:

(b) The Chief General Manager / Chief Operating Officer of OTC Exchange of India as an alternate to the Managing Director;

(d) Not more than seven (7) representatives of Members and Dealers, as may be decided by the Board from time to time.

The quorum for the meetings of the OTC Committee will be atleast four members of the Committee or such other number as may be decided by the Board of Directors from time to time.

The OTC Committee shall, inter alia, have the following responsibilities and powers:

(b) recommending to the Board the appointment and admission of Members, Dealers and Sponsors in accordance with Chapter III, IV and V respectively;

(f) supervising the market and promulgating such Rules, Regulations, Procedures and Codes of Conduct as it may deem fit in the interests of the investors;

(g) determining from time to time, fees, deposits and other monies payable to the Exchange by Members/Dealers/Sponsors and companies whose securities are admitted/to be admitted to the Official List and such other charges payable by investors and the scale of brokerage and other charges chargeable by Members and Dealers.

(h) prescribing, from time to time and administering and effecting penalties, fines and other consequences, including suspension/expulsion for defaults or violation of any requirements of the Bye-laws, Rules and Regulations, Procedures and Code of Conduct of the Exchange and criteria for admission, if any, promulgated thereunder;

(j) administration, maintenance and investment of the corpus of the Compensation Fund, or such other Fund or funds as may be created or designated;

(k) power to take disciplinary action/proceed legally against any Sponsor/Market Maker/Member/Dealer;

(l) dissemination of information, announcements to be placed on quotation systems;

(n) listing fees payable by the company whose securities are admitted to dealings on the Exchange;

04. OTC Committee may from time to time authorize the Managing Director or such other person(s) to carry out such acts, deeds and functions in accordance with such provisions as may be laid down in this regard for fulfilling the responsibilities and discharging the powers defined in clause 03 above.

05. The OTC Committee may from time to time create, constitute sub-committees to carry on business complying with all regulations and guidelines laid down by the OTC Committee. The constitution, quorum and responsibilities of such sub-committees will be determined by the OTC Committee.

The OTC Committee shall be bound and obliged to carry out and implement any directives issued by the Board from time to time and shall be bound to comply with all conditions of delegation and limitations on the powers of the OTC Committee as may be prescribed.

The sub-committees shall consist of such number of members of which not more than 40% shall be the representatives of the Members/Dealers of the Exchange and the balance 60% shall be representatives of persons other than Members/Dealers of the Exchange, including public representatives appointed by SEBI. Appointment of members on these three sub-committees shall be subject to the prior approval of SEBI. Three members shall form a quorum for all the three sub-committees. ²

06. The Board of Directors, may from time to time create, constitute, re-constitute, revoke sub-committees, statutory or otherwise, and take any other decisions with regard to the same on a case to case basis, to provide guidance, comments and suggestions for the day-to-day functioning of the Exchange. The quorum and responsibilities of the sub-committees will be determined by the Board of Directors.

The Arbitration Committee shall be appointed by the Board of Directors for the purpose of adjudicating any disputes between:

All unsettled claims, complaints, differences and disputes between Members inter se and Members and Non-Members, arising out of or in relation to any bargains, dealings, transactions or contracts, whether entered into or not, shall be subject to the provisions of the Arbitration and Conciliation Act, 1996 as provided under the Bye-laws and Regulations and shall be referred to the Arbitration Committee.

To deal with all cases of defaulting or defaulted Members/Dealers including the claims arising thereof and filed by the Members/Dealers of the Exchange. This Committee shall also be responsible for review of the cases of defaulted Members/Dealers.

The main function of this Sub-committee will be disciplining the erring Member/Dealer as per the directions of the Board or OTC Committee or suo motu and to make recommendations to the Board of Directors regarding enforcement of discipline amongst Members/Dealers of the Exchange. This Sub-committee will be empowered to impose fines and/or penalties and to make recommendations to the Board for higher fines and penalty including expulsion, suspension or termination of Membership/Dealership.

The Member/Dealer/Sponsor Selection Committee with a maximum strength of six members shall be appointed by the Board of Directors and shall comprise of the Managing Director of the Exchange, not more than one public representative, not more than one SEBI nominee, not more than one OTC Committee member and not more than two additional members being such persons nominated by the Board to be known as �other nominees�. ³

The Standing Committee shall be appointed by the Board of Directors of the Exchange, with one member who is an outside computer expert.

� The Standing Committee shall investigate the problem of all instances of hanging/slowdown/breakdown and any other problem in the computerized trading system, even if the disruption is less than five minutes.

� The Committee, upon examination of the issue/s shall submit a report to the Governing Board/Council of the Stock Exchange.

� The Governing Board/Council of the Stock Exchange shall deliberate on the aforesaid report and take suitable action/remedial measure.

In case of stoppage beyond five minutes, the Exchange shall explain and report to SEBI about the incident as well as the remedial measures taken. The Exchange shall also issue a press release in this regard for greater transparency and in the interest of the investors.[Inserted as per SEBI�s Circular Nos.SMD/Policy/Cir-2/98 dated January14,1998 and MRD/DoP/SE/Cir-14/2006 dated September 28,2006 and Board of Directors Resolution dated December 02,2006 and SEBI approval vide letter No.MRD/DSA/87148/2007 dated February 22,2007].

² Amended by SEBI on November 12, 1998 and approved by the Board of Directors Resolution dated June 25, 1999.

³Inserted by the Board of Directors Resolution dated March 12, 1999 and approved by SEBI on September 9, 1999.

OTCEI shall promote and assist dealings in securities of any nature issued by the limited companies in India, including those listed and/or traded on the other recognised stock exchanges in India. Provided however, that the existing listed companies and/or small and medium sized companies with a capital base of upto Rs.3 crores seeking listing on the Exchange, shall not be eligible for listing on any other Stock Exchange in India.

The Exchange may operate one or more segments in each of its securities market in any or all of the categories such as listed, permitted, listing and trading of units of mutual funds, listing and trading of debentures, bonds, trading in unlisted securities, operation of equity/bond on tap, trading in futures and options and trading in such other marketable securities as defined in Section 2(h) of the Securities Contracts (Regulation) Act, 1956 as may be permitted by SEBI.

Every applicant desiring to be appointed as a Member of the Exchange shall make an application to the Exchange to that effect alongwith such fees, deposits and other monies in such form and in such manner as may be specified by the Exchange from time to time. Every applicant shall fulfill all the qualifications prescribed in that behalf in the said rules.

The Member Selection Committee shall process all the applications made in accordance with Clause 01-A of this Chapter and shall make such recommendations as it may deem fit in this regard to the Board of Directors. If the Member Selection Committee decides to refuse Membership to any applicant, then they may state their reasons for such a decision in writing and may also give the concerned applicant a reasonable opportunity of being heard before refusing Membership to it.

The final decision in respect of the appointment of the Members shall vest in the Board of Directors. If the Board of Directors decides to refuse Membership to any applicant, then they shall state their reasons for such a decision in writing and may also give the concerned applicant a reasonable opportunity of being heard before refusing Membership to it.

All applicants appointed as Members on the Exchange shall have to register with SEBI.

(a) Members shall adhere to the SEBI directives and guidelines, Bye-laws, Rules, Regulations and Code of Conduct and such directives issued by the Exchange as may be applicable from time to time.

(b) All contracts entered into by a Member in its capacity as a Member of the Exchange, shall be in accordance with the Bye-laws, Rules, Regulations, directives and guidelines of the Exchange.

(c) Each Member shall confirm, annually, their compliance of the Bye-laws, Rules, Regulations, directives and guidelines of the Exchange in that year to OTCEI, wherever specified, and every such confirmation shall be certified by a Statutory Auditor or a Chartered Accountant.

(d) Members acting as Sponsors shall adhere to the Rules, Bye-laws, Regulations and rulings of the Board of the Exchange/OTC Committee as they may determine to be applicable for Sponsorship and/or market making.

(a) Deal in OTCEI securities either on their own account as principals or on behalf of their clients.

�Sponsor� is the entity appointed by OTCEI as a �Sponsor� (entity different from the Member) who is a Merchant Banker registered with SEBI.

(ii) The Sponsor is not eligible to carry on any primary/secondary market operations.

(iii) The Sponsor is responsible for the proper discharge of market making obligations by its nominated entities.

(iv) The Sponsor does not require separate registration as a Stock Broker with SEBI.

III-A. NORMS FOR SALE, TRANSFER AND SURRENDER OF DEALERSHIP, MEMBERSHIP AND SPONSORSHIP. ⁴

Subject to such terms and conditions as the Relevant Authority may prescribe from time to time and to the prior written approval of the Relevant Authority, conversion or transfer of the legal status of a Member/Dealer may be effected as follows:

01. Membership/Dealership/Sponsorship of the Exchange can be transferred in the following two ways:

a) Transfer by way of sale means transfer wherein the Membership/Dealership vests in an absolute different entity.

b) Transfer by change of status means and includes transfer/conversion of legal status / upgradation of Dealership/Membership from individual entity to corporate entity, partnership entity to corporate entity, corporate entity to a subsidiary/group company, Dealer to Member, Dealer to Sponsor, Member to Sponsor and Sponsor to Member, where the controlling interest in the transferee entity vests in the hands of the same individual/groups of shareholders who jointly or severally hold controlling interest in the transferor entity.

a) Application: A Dealer desirous of transferring the Dealership of the Exchange by way of sale shall make an application to that effect to the Exchange alongwith such fees, deposits, processing charges, transfer charges and other monies in such form and in such manner as may be specified by the Exchange from time to time, subject to the criteria, terms and conditions prescribed by the Exchange from time to time.

b) Recommendations of the Dealer Selection Committee: The Dealer Selection Committee shall process all the applications made in accordance with sub-clause (1) above and shall make such recommendations as it may deem fit in this regard to the OTC Committee. The Dealer Selection Committee reserves the right to review/reject applications for sale of Dealership in favour of the transferee.

c) Final decision of the OTC Committee: The decision of the OTC Committee in respect of the transfer by way of sale of the Dealership shall be final.

d) Compliance with rules, regulations and statutes: The transferee entity shall be admitted as Dealer on the Exchange only after fulfilling the prescribed selection criteria and compliance with all relevant requirements of the Securities Contracts (Regulation) Act, 1956 and Rules thereunder, provisions of the Companies Act., 1956, Securities and Exchange Board of Act, 1992 and the rules and regulations framed thereunder, any other related statutes and the Bye-laws, Rules and Regulations and guidelines of the Exchange.

⁴ Inserted by the Board of Directors Resolution dated September 25, 1998 and approved by SEBI on November 20, 1998.

e) Processing Charges: The processing charges for the sale of the Dealership shall be paid to the Exchange, in the form and manner as maybe prescribed by the Exchange from time to time.

f) Procedural formalities: The Managing Director of the Exchange shall have the authority to prescribe the procedural formalities and guidelines to give effect to the above.

a) Application: A Member desirous of transferring the Membership of the Exchange by way of sale shall make an application to that effect to the Exchange alongwith such fees, deposits, processing charges, transfer charges and other monies in such form and in such manner as may be specified by the Exchange from time to time, subject to the criteria, terms and conditions prescribed by the Exchange.

b) Recommendations of the Member Selection Committee: The Member Selection Committee shall process all the applications made in accordance with sub-clause (1) above and shall make such recommendations as it may deem fit in this regard to the Board of the Exchange. The Member Selection Committee reserves the discretion and the right to review/reject applications for sale of Membership in favour of the transferee.

c) Final decision of the Board of Directors: The decision of the Board of Directors in respect of the transfer of the Membership by way of sale shall be final.

d) Compliance with rules, regulations and statutes: The transferee entity shall be admitted as Member on the Exchange only after fulfilling the prescribed selection criteria and compliance with all relevant requirements of the Securities Contracts (Regulation) Act, 1956 and Rules thereunder, provisions of the Companies Act., 1956, Securities and Exchange Board of Act, 1992 and the rules and regulations framed thereunder, any other related statutes and the Bye-laws, Rules and Regulations and guidelines of the Exchange.

e) Processing Charges: The processing charges for the sale of the Membership shall be paid to the Exchange, in the form and manner as maybe prescribed by the Exchange from time to time.

f) Procedural formalities: The Managing Director of the Exchange shall have the authority to prescribe the procedural formalities and guidelines to give effect to the above.

⁴ Inserted by the Board of Directors Resolution dated September 25, 1998 and approved by SEBI on November 20, 1998.

i. Transfer of Membership/Dealership by change of status is allowed in the following cases:

iii. Procedural formalities: Managing Director of the Exchange shall have authority to prescribe the procedural formalities and guidelines to give effect to the above.

i. Promoter Members of the Exchange are allowed to transfer their Membership to such entities as maybe permitted under the prescribed guidelines and/or directives of the Exchange, without having to pay for acquisition of separate Membership.

ii. On approval of transfer, the transferee entity would have to pay the annual fees, processing fees and any other applicable charges.

a) Application: A Member/Dealer desirous of surrendering the Membership/Dealership on the Exchange may do so by making an application to that effect to the Exchange and stating the reasons for the same.

b) Final Decision of the OTC Committee: The decision of the OTC Committee in respect of the surrender of the Dealership/Membership shall be final.

c) Compliance by Member/Dealer: The Member/Dealer seeking to surrender their Membership/Dealership shall comply with the following:

� Submit an indemnity in the prescribed format indemnifying the Exchange against any future claims, liabilities, losses, proceedings that may arise in respect of the activities of the Membership/Dealership.

� Surrender the SEBI registration certificate and the sub-broker�s registration certificate for cancellation .

d) Refund of Fees by the Exchange: The Exchange, on approval of the surrender of the Membership/Dealership shall refund to the Member/Dealer only those amounts which have been stated as being refundable, like Settlement Deposit/Base Minimum Capital.

e) Procedural formalities: The Managing Director of the Exchange shall have the authority to prescribe the procedural formalities and guidelines to give effect to the above.

⁴ Inserted by the Board of Directors Resolution dated September 25, 1998 and approved by SEBI on November 20, 1998.

The Base Minimum Capital is being taken as security for due performance and fulfilment by the member of his engagements, commitments, operations, obligations towards the Exchange /Clearing Entity or any other party, arising out of or incidental to any contracts made, executed, undertaken, carried on or entered into by the member on the OTCEI. The minimum Base Capital is Rs.4 lakhs. All members have to comply with the Base Minimum Capital requirement before their activation on the Exchange.

i) Cash to be deposited with the Exchange- minimum 25 %

ii) Deposit of Fixed Deposit Receipts (FDRs) - minimum 25 % issued by approved banks

SEBI vide its circular no. SMDRP/POLICY/CIR-19/99 dated July 02, 1999 had recommended that the composition of the Base Capital be as follows:

iii) Cash/FDR/Bank Guarantee/Securities � Maximum of 75%

The Exchange proposes to continue with the earlier composition of BMC as the same is better in terms of risk management.

SEBI vide circular no. SEBI/SMD/SE/Cir � 24/2003/18/06 dated June 18, 2003 has amended the clause relating to the minimum BMC as follows:

The Exchanges having average daily turnover of less than Rs.1 crore for the past three consecutive months from the date of this circular may maintain the BMC at Rs. 1 lakh. Besides, the exchanges which would have the average daily turnover less than Rs.1 crore for any three consecutive months after the date of this circular would also be eligible to maintain the BMC at Rs.1 lakh. The excess of the BMC over Rs.1 lakh may be refunded to the members subject to the following conditions:

a) The member has been inactive at the stock exchange for the past 12 months i.e., he has not carried out any transaction on that stock exchange during the past 12 months.

d) The exchange shall retain/deduct/debit from the BMC to be refunded, the amount of any complaints/claims of the investors against the member and for dues crystallized and contingent to the exchange/SEBI arising out of pending arbitration cases, appealed arbitration awards, administrative expenses, SEBI turnover fees, etc.

e) The exchange shall ensure that the member has paid the SEBI turnover fees and has obtained a No- Objection Certificate (NOC) from SEBI in this regard.

However, if the average daily turnover of the exchange exceeds the prescribed level of Rs. 1 crore for a period of one month at any time after the date of this circular, the exchange shall enhance the requirement of the BMC of the members back to the level stipulated in SEBI Circular SMD/SED/RCG/270/96 dated January 19, 1996 and shall obtain undertaking to this effect from the members.

Trading Member/Dealer may opt to meet the securities component of the deposit requirements by way of deposit of approved securities to be valued at a margin, with the custodian. The deposit is being taken as a security for due performance and fulfilment by the Trading Member/Dealer of its engagements, commitments, operations, obligations or liabilities as a Trading Member/Dealer including any sums due by the Trading Member/Dealer to OTCEI or any other party arising out of or incidental to any contracts made, executed, undertaken, carried on or entered into by the Trading Member/Dealer on the OTC Exchange of India.

As directed by Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/SMD/SE/CIR-22/2003/11/06 dated June 11, 2003, the revised composition of eligibility criteria for securities shall be as follows:-

The eligible shares for the purpose of the securities portion of the base minimum capital shall only be those which are classified as Group 1 in terms of the parameters of volatility and liquidity as stipulated in SEBI circular No. SMD/POLICY/CIR-9/2003 dated March 11, 2003, subject to a standard haircut of 15%. However, the smaller stock exchanges can also accept the shares that are in the Group 1 of the BSE or NSE for the purpose of base minimum capital. The valuation for these shares would be done atleast once a week.

In case the member wishes to submit additional capital the same may be submitted by means of Cash, Fixed Deposit Receipts or Bank Guarantees in favour of OTC Exchange of India.

As directed by Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/SMD/SE/CIR-22/2003/11/06 dated June 11, 2003, it has been decided that the revised composition of additional capital shall be as follows:-

1.1 The minimum cash component of the additional capital and margins shall be increased from the existing level of 30% to 50%.

1.2 The cash component of additional capital and margins shall be increased to 50% in a manner so that this is complied with by the member brokers of the exchange by the end of June 2003.

1.3 The mark to market margin shall continue to be collected by the exchanges only in the form of cash, bank guarantee and FDRs as prescribed earlier by SEBI circular no SMDRP/Policy/Cir-19/99 dated July 02,1999.

1.4 The Cash component may be in the form of cash or cash equivalents. Cash equivalents would be as follows.

a) Cash equivalent shall include FDRs, bank guarantees (as specified below), Government securities and units of the schemes of liquid mutual funds or government securities mutual funds (by whatever name called which invest in government securities).

c) The hair cut for units of the schemes of Liquid mutual funds or government securities mutual funds (by whatever name called which invest in government securities) shall be atleast 10% of Net Asset Value (NAV).

d) The Bank Guarantees shall be considered as cash equivalent only if the guarantees have been provided by the banks whose networth is more than Rs 500 crores.

1. The exchanges shall lay down exposure limits either in rupee terms or as percentage of the Trade Guarantees Fund (TGF)/ Settlement Guarantee Fund (SGF) that can be exposed to a single bank directly or indirectly and in any case the exposure of the TGF/SGF to any single bank shall not be more than 15% of the total liquid assets forming part of TGF/SGF of the exchange.

2. The exposure as mentioned above would include guarantees provided by the bank for itself or for others as well as debt or equity securities of the bank which have been deposited by the members for additional capital or margins.

2.1 While Section 1 specifies the cash and non- cash component of additional capital and margin and clause 1.5 in particular specifies the securities including the units of certain types of mutual fund schemes which could be considered as cash equivalent, this section specifies the type of securities, including equity shares, units of mutual funds which could be considered as eligible securities and hair cut for the purpose of non- cash component of base minimum capital, additional capital and margin.

a) Equity shares classified in Group 1 at the stock exchange in accordance with the parameters of volatility and liquidity as prescribed in SEBI circular no. SMD/POLICY/CIR-9/2003 dated March 11, 2003 shall be eligible as security for the non-cash component of the additional capital and margin subject to haircut equivalent to the respective VaR of the equity shares.

b) Units of all mutual funds shall also be eligible security for the purpose of non-cash component of additional capital and margin subject to a haircut equivalent to the VaR of the unit�s NAV plus any exit load charged by the mutual fund.

[Inserted as per the Board Resolution passed at the 67^th Board meeting held on August 7, 2003 and by SEBI vide Circular No.SEBI/SMD/SE/Cir-24/2003/18/06 dated June 18, 2003 & Circular No.SEBI/SMD/SE/CIR-22/2003/11/06 dated June 11, 2003]

a. Every applicant desiring to be appointed as a Dealer of the Exchange shall make an application to the Exchange to that effect, alongwith such fees, deposits and other monies, in such form and in such manner as may be specified by the Exchange from time to time. Such fees, deposits and other monies as are specified by the Board would be payable on appointment as Dealer and for continued appointment thereof.

b. Every applicant so applying shall fulfill all the qualifications prescribed in that behalf in the rules.

c. The Exchange is empowered to appoint the applicant as a Dealer in accordance with the rules it may frame from time to time, in this regard.

d. The Exchange may specify pre-requisites for such appointment in terms of professional qualification(s), market experience, capital, infrastructure adequacies, etc.

e. For the purpose, the Exchange may specify and hold written examinations, discussions and interviews with the applicants and perform such other acts and specify such other things as it may deem fit, including formats and procedures for application for admission, termination, re-admission, etc., or delegate the abovesaid functions to a Committee created for the purpose.

The Dealer Selection Committee shall consider the names of the applicants on the basis of the written/computerised examination and interviews and shall make such recommendations as it may deem fit in this regard to the OTC Committee.

a. The final decision in respect of the appointment of the Dealers shall vest in the OTC Committee and it shall take into consideration the recommendations of the Dealer Selection Committee before taking the said final decision.

b. If the OTC Committee decides to refuse Dealership to any body corporate or individual, then they shall state their reasons for such a decision, in writing, and may also give the concerned applicant a reasonable opportunity to be heard before refusing Dealership.

c. OTC Committee may at its absolute discretion reject any application for Dealership; if for any reason the application is rejected, the admission/ application fee may be refunded to the applicant after deducting service charges.

a. Dealers shall adhere to the Rules, Bye-laws, Regulations and Code of Conduct of the Exchange and to such guidelines, directives, rulings issued by Exchange from time to time, as may be applicable.

b. All contracts entered into by a Dealer shall be in accordance with Bye-laws, Rules, Regulations, directives and guidelines of the Exchange.

c. Dealers shall comply with such Exchange requirements with regard to advertisements and issue of circulars in connection with their activities as Dealers.

d. Dealers shall furnish every year to the Exchange, their compliance of the Bye-laws, Rules, Regulations, directives and guidelines of the Exchange in that year and every such confirmation shall be certified by a Statutory Auditor or a Chartered Accountant.

e. Dealers shall furnish such information as periodic returns and certificates from such professionals pertaining to their OTCEI operations as may be required by the Exchange from time to time.

a. Deal in OTCEI securities either on their own account as principals or on behalf of their clients.

(For the purpose of this Chapter, �Sponsor� means the entity appointed by the company, who could either be a �Sponsor� or a �Member� appointed by the Exchange.)

Every company seeking the listing of its securities to the Official List must appoint a Sponsor who should either be a Member/Sponsor of the Exchange.

Every company so appointing a Sponsor to the issue shall enter into a written Sponsorship Agreement in the prescribed form.

The Sponsorship Agreement so entered into shall be filed/ registered with the Exchange and such a filing of the Sponsorship Agreement shall serve as an intimation to the Exchange of the appointment of a Sponsor.

(a) Ensuring that the company seeking admission of its securities to the Official List complies with the listing and continuing requirements of the Exchange.

(b) Assessing the company�s suitability for the Exchange with reference to its existence/proposed activities and lines of business, management, prospects, etc., for the purpose mentioned in Clause 2(a) above.

03. The Board/OTC Committee may approve the appointment of a Sponsor for a company seeking admittance of its securities to the official list and may stipulate such requirements for the purpose as it may deem fit.

04. The Board/OTC Committee, at its absolute discretion can refuse permission to any Member for acting as a Sponsor.

05. OTC Committee may stipulate from time to time the minimum and/or maximum investment which Sponsors and other Market Makers would make in any issue of security.

(For the purpose of this Chapter �The term �Member(s)� includes �Member(s)�, Dealer(s)� and �Sponsor(s)� wheresoever the context so admits)

In order to avoid mis-utilisation of trading terminals granted to the members in the various locations, it has been decided that the trading terminals will be granted only at the Registered Office of the Member(s), Branch Office(s) and at their registered sub-brokers� offices. Any member(s) found mis-utilising their trading terminals granted by the Exchange, suitable action will be taken by the Exchange which may include disciplinary proceedings, penalties, suspension and expulsion of Membership.

Inserted by the Board of Directors Resolution dated December 7, 2001 and approved by SEBI on October 22, 2001.

a. Members/Dealers may notify the Exchange of their intention to act as a Market Maker and be registered as Market Makers in any security eligible for market making.

b. No Member/Dealer shall act as a Market Maker unless such Member/Dealer is approved by the Exchange in accordance with the Rules, Regulations, and Bye-laws and the approval has not been suspended or cancelled. Application for registration shall be in such forms prescribed by the Exchange from time to time. If the Exchange has no objection, it shall, within such number of business days as may be prescribed from time to time of receipt of such applications, designate the Member/Dealer as a registered Market Maker for that security.

c. For every security admitted to the Official List, the Sponsor/Member, (unless he is �Sponsor� as per Chapter III for this clause) if it so desires, may be a registered Market Maker for the security. The Member/Sponsor, in addition to itself, and subject to the approval of the Exchange may appoint as many number of Market Makers for the security of which it is a Sponsor as it may desire, provided however that it shall be bound to appoint a minimum of atleast two Market Makers for the said security.

d. Market Makers shall notify the Exchange before the commencement of making market in every security by giving notice in writing to the Exchange. A registered Market Maker shall not commence making market in any security until one business day after notice of its registration has been disseminated through the quotation system.

(i) undertake to publish regularly and continuously, competitive bid and offer quotations in the quotation system, with respect to that security and to effect transactions in a minimum quantity of such number, prescribed from time to time, of such securities (or such other number of securities as may be prescribed by the Exchange from time to time) at its quoted prices per business day;

(ii) undertake to make market for the security for such period of time from the date the security becomes available for trading by the public as required under the rules of Market Making prescribed from time to time by the Exchange.

(iii) undertake to execute orders for the purchase or sale of the securities at its quoted prices.

b. A registered Market Maker may cease making market in a particular OTCEI security after such period as decided by the Exchange from the commencement of making market in that security, after having given the required notice of intention to the Exchange. The required period of notice in this case shall be decided from time to time by the Exchange.

c. A registered Market Maker may cease making market in that OTCEI security, provided formal approval has been obtained from the Exchange. Such approval will normally be granted in situations where, in the opinion of the Exchange, it is either impractical or undesirable for the registered Market Maker to continue to operate on account of events beyond its control.

(1) The Exchange may limit or prohibit the authority of a registered market maker to display on or enter quotations into the quotation system if:-

(a) such Market Maker who is a Member/Dealer has been or is expelled or suspended from Membership/Dealership of the Exchange, or is unable to comply with Bye-Laws, Regulations and Rules of the Exchange and the Rules and Regulations prescribed by SEBI/SCRA;

(b) such Market Maker who is a Member/Dealer has been or is expelled or suspended by the Exchange; or is unable to comply with Exchange�s Bye-Laws, Regulations and Rules;

(d) such Market Maker is in such financial or operating difficulty and the Exchange determines that such Market Maker cannot be permitted to display on or enter quotations into the quotation system with safety to investors, creditors, other Members/Dealers of the Exchange; or

(e) such Market Maker, in the view of the Exchange ceases to meet the qualification requirements for registration as a Market Maker.

(2) Any Market Maker against whom the Exchange takes disciplinary action pursuant to clause 03(1) above shall be notified in writing of such action. Such action shall be effective from the date of written notifications. The Exchange shall flash the notification on its information dissemination system.

(3) Any Market Maker against whom the Exchange takes action, may request an opportunity for a hearing within such number of working days of the date of notification pursuant to Clause 3(2) above. A request for hearing shall not operate as a stay of action but the Market Maker will have to stop dealings/ shall forthwith stop dealings.

(4) A written decision shall be issued within such period from the date of hearing as the Exchange may notify and a copy shall be sent to the Market Maker.

(5) On revocation of suspension, the Market Maker can display on or enter quotations into the quotation system.

The OTC Committee will determine and announce from time to time Business Rules on matters enumerated below regarding the acts of Market Makers for each security traded on the Exchange:

(a) Limit of spread between bid and offer rates for different securities if found necessary

(b) Minimum bid/offer quantities and maximum bid/offer quantities to be offered to be bought or sold

(d) In case of a market maker�s inventory getting exhausted, allowing market makers to quote only purchase price offers (provide buy quotes), till such time as sufficient stock of securities is built up, to re-commence providing sell quotes; and

(e) Other matters which may affect smooth operation of trading in securities on the Exchange, keeping in view the larger interests of the investors.

(f) the minimum stock of scrips which the trading Member/Dealer must maintain, below which he must intimate the Exchange.

The Exchange shall be open on all days except on Public Holidays under the Negotiable Instruments Act, 1881 and on such holidays as may be declared by the Exchange�s authorities in advance from time to time.

(a) alter or cancel any of the Exchange holidays fixed in accordance with these provisions.

(b) keep the Stock Exchange and/or the market open for business on any day notwithstanding that such day is a public holiday under the Negotiable Instruments Act, 1881 or an Exchange holiday declared by the Exchange authorities in advance.

The Exchange authorities may at their discretion and for reasons to be recorded, close the market on days other than or in addition to holidays.

Trading Sessions on the Exchange shall be held on the business days and during the hours prescribed or on such other days or during such other hours as the Exchange may from time to time prescribe in addition thereto or in modification or substitution thereof. The Exchange may, from time to time, specify business hours for different types of deals such as spot, ready and odd lots, auctions, etc.

The Exchange may reduce, extend or otherwise alter the time of any trading session/(s) of the Exchange on any particular day, if it is deemed necessary.

All dealings shall be effected by electronic media followed by written confirmation.

Dealings effected before or after the hours of trading sessions shall not be taken cognizance of by the Exchange.

The unit of trading in each security shall be for such number or for such amount as the Board of Directors may from time to time specify and unless so specified the unit of trading shall be in the lots prescribed or in such other lots as the Exchange may from time to time prescribe in modification or substitution thereof.

All transactions shall be in multiples of the trading unit unless an odd lot is stipulated when the transaction is completed.

Members shall not enter into contracts as principals with persons other than Members of Stock Exchanges recognised under the Securities Contracts (Regulation) Act, 1956, unless they have secured the consent or authority of such persons and when such consent or authority is other than in writing, they shall secure written confirmation of such consent or authority within three days from the date of the contract. Provided however that, no such written consent or authority shall be necessary for closing-out any outstanding contracts entered into by such persons in accordance with these Bye-laws, Rules and Regulations.

Every Member shall issue a Contract Note to his constituents when acting for them as agents, for trades executed in such format as specified as the Exchange may from time to time prescribe in addition thereto or in modification thereof, with all relevant details as required therein to be filled in and issued in such manner and within such time as prescribed by the Exchange. The contract note shall be signed by a Member or his authorised signatory or his constituted attorney.

A contract note may also be issued by a member in electronic form in such format as may be prescribed by the Exchange from time to time, duly authenticated by means of digital signature as specified in the information Technology Act, 2000 and Rules made thereunder.

Members shall keep a record of electronic contract notes in a soft non-tamperable form in compliance with the provisions of the Information Technology Act, 2000.[These two paragraphs inserted as per the resolution passed by the Board at the 73^rd Board Meeting held on 19.08.2994 and approve by SEBI vide letter No.MRD/DSA/OTCEI/17880/2004 dated 13.08.2004].

Unless otherwise provided in these Bye-laws, all dealings carried out in respect of the securities shall be subject to the Bye-laws, Regulations and Rules of the Exchange.

Notwithstanding anything contained hereinabove, dealings on the Exchange in one or more of the trading segments can be effected in the dematerialised mode. The nature of such dealings will be as per the guidelines and circulars prescribed by the Exchange from time to time in conjunction with the SEBI guidelines and circulars as may be issued from time to time to that effect.

Every member shall remit to the Exchange, the Securities Transaction Tax in respect of the taxable securities transactions entered into by him as purchaser on the Exchange either on his own or on behalf of his Constituents in accordance with the procedures prescribed by the relevant authority from time to time and subject to the provisions of Income Tax Act, 1961 and the Securities Transaction Tax Rules,2004.

If a member, who is liable to pay the Securities Transaction Tax, fails to pay the same, he shall be liable for such consequences of non payment including but not limited to withdrawal of trading facility, appropriation from the monies of the Member, withholding of pay outs, etc. as may be prescribed from time to time. [Inserted as per SEBI�s letter No.MRD/DS/OTCEI/37601/2005 dated April 04,2005 and the Board resolution dated April 19,2005].

^{5, 6
& 7}Deleted by the Board of Directors Resolution dated March 12, 1999 and approved by SEBI on September 9, 1999.

⁸Inserted by the Board of Directors Resolution dated March 12, 1999 and approved by SEBI on September 9, 1999.

Dealings in securities shall be permitted on the Exchange as provided in these Bye-laws and Regulations and save as so provided, no other dealings are permitted/allowed.

Dealings are permitted on the Exchange, in securities which are from time to time admitted to the Official List for dealings on the Exchange by the OTC Committee / Managing Director, in accordance with the provisions in that regard prescribed in these Bye-Laws, Rules and Regulations and continue to be on the Official List.

Dealings shall be deemed to have been permitted in Government Securities which term for the purpose of these Bye-laws made thereunder shall denote securities issued by the Government of India, State Governments, Port Trusts, Municipalities, local authorities, statutory bodies and similar other bodies or authorities and include treasury bills issued by the Government of India. Government Securities shall be deemed to have been admitted to dealings on such market segment of the Exchange as may be prescribed by the Board of Directors/OTC Committee as from the date of their inclusion on the Official List of OTCEI securities.

The OTC Committee/Managing Director may, in its discretion and subject to such conditions as it may deem proper, permit dealings in any security/securities admitted to dealings on any other stock exchanges or which are regularly dealt in on such stock exchanges.

The OTC Committee/Managing Director may suspend or prohibit dealings on the Exchange in any security or securities by giving reasons therefore.

The OTC Committee/Managing Director may in its discretion permit dealings in Provisional Documents which term for the purposes of these Bye-Laws, Rules and Regulations denotes coupons, fractional certificates, letters of renunciation or transferable letters of allotment, letters of application or acceptance, options, futures, other rights or interests in securities, warrants issued or to be issued by an issuer or other similar documents in respect of an issuer whose securities are sought to be admitted/admitted to dealings or in whose securities dealings are permitted on the Exchange until such period of time as these provisional documents are converted into formal documents by the company.

The OTC Committee/Managing Director may permit specific bargains to be made in the case of securities of issuers not admitted to dealings on the Exchange, which for the time being are prohibited or suspended for dealings.

The Exchange shall not permit dealings in prospective dividends and all contracts for the purchase and sale of prospective dividends shall be deemed void.

Options in securities are permitted. OTC Committee/Managing Director reserves the right to announce schemes in this regard at any time in future.

Application for admission of securities to dealings on the Exchange shall be made to the Exchange in such form as the Exchange may from time to time prescribe.

A notice of any application for admission of securities to dealings on the Exchange shall be placed on the quotation system of the Exchange, for the information of Members for at least such number of days as maybe specified, prior to its consideration by the OTC Committee/Managing Director.

The OTC Committee/Managing Director shall consider and may in its discretion approve, subject to such terms as it deems proper, or defer, or reject any application for admission of securities to dealings on the Exchange.

The OTC Committee/Managing Director may not grant admission to dealings to the securities of an issuer on the Exchange unless it complies with the listing conditions and requirements prescribed in the Bye-laws, Rules and Regulations, or such other conditions and requirements as the Exchange may from time to time prescribe, in addition thereto or in modification or substitution thereof, in addition to the listing requirements prescribed in the Securities Contracts (Regulation) Rules, 1957, and SEBI directives which are incorporated in the aforesaid Regulations.

Provided that in any particular case, the Exchange may by a resolution, waive or dispense with the strict enforcement of the listing requirements prescribed in the Securities Contracts (Regulation) Rules, 1957 to the extent the said Rules so provide, and may also by a resolution waive or dispense with the strict enforcement of any or all of the other listing conditions and requirements prescribed in the Bye-laws, Rules and Regulations.

(a) Admission to dealings on the Exchange shall not be granted to securities issued by a body corporate, fund or other entity registered outside India unless:

(i) the OTC Committee/Managing Director is of the opinion that there is adequate public interest in such securities in India;

(iii) the body corporate agrees to maintain a register of members in India and agrees to abide by such other criteria as prescribed by the Exchange and such other statutory bodies from time to time.

In case of a body corporate registered outside India, the Board/OTC Committee /Managing Director may by a resolution waive or dispense with the strict enforcement of any or all of the listing conditions and requirements prescribed in these Rules, Bye-laws and Regulations except those prescribed in clause (13)(a), provided that the securities of such body corporate are admitted to dealings on any stock exchange outside India or the OTC Committee is satisfied otherwise.

The above will be subject to the provisions of the Foreign Exchange Regulation Act, Rules and any other rules and provisions of the Reserve Bank of India, as applicable.

Admission to dealings on the Exchange shall not be granted to securities issued by a Company to vendors and credited as fully or partly paid until such period as decided by OTC Committee/Managing Director has expired after the date of issue. For the purpose of this provision, securities issued as fully or partly paid to any person or persons or firm or corporation in consideration of the sale or transfer of property or business or in consideration of services rendered in the formation or promotion of the Company shall be deemed Vendor�s Securities.

Companies whose securities are granted admission to dealings on the Exchange shall pay such fees as OTC Committee/Managing Director may from time to time determine, in consonance with the fees prescribed by SEBI guidelines. However, Exchange may in its discretion waive the said payment of fees by any company.

Subject to the provisions of the Securities Contracts (Regulation) Act, 1956 and the Securities Contracts (Regulation) Rules, 1957 the OTC Committee/Managing Director may suspend at any time, by furnishing reasons therefore, the admission to dealings on the Exchange granted for any security for such period or periods as it may determine. At the expiration of the period of suspension, the OTC Committee/Managing Director may reinstate such security for dealing subject to such conditions as it deems fit.

The OTC Committee/Managing Director may, if necessary, withdraw admission to dealings granted to securities which are about to be exchanged with or converted into other securities as a result of any scheme or reorganisation or reconstruction or which being redeemable or convertible securities are about to fall due for redemption or conversion.

18. Withdrawal of Admission to Dealings on Liquidation, Merger or Amalgamation and Reinstatement

If any Company be placed in final or provisional liquidation or is about to be merged into or amalgamated with another Company, the OTC Committee/ Managing Director may at its discretion, withdraw the admission to dealings on the Exchange granted to its securities. The OTC Committee/Managing Director may accept such evidence, as it deems sufficient on such liquidation, merger or amalgamation. Should the merger or amalgamation fail to take place or should any Company placed in provisional liquidation be reinstated and an application be made for readmission of its securities to dealings on the Exchange, the OTC Committee/ Managing Director shall, have the right of approving, refusing or deferring such application.

Subject to the provisions of the Securities Contracts (Regulation) Act, 1956 and the Securities Contracts (Regulation) Rules, 1957, the OTC Committee may, at its discretion by passing a resolution to that effect, and where deemed necessary after giving an opportunity to the Company to explain, withdraw the admission to dealings on the Exchange granted to its securities either for listing on any other stock exchange or for breach of or noncompliance with any of the listing conditions or requirements or for any other reason whatsoever to be recorded in the minutes. Such withdrawal of admission could also be as a result of the Company�s request, with a view to seeking listing on other stock exchange/(s).

The OTC Committee/Managing Director in its discretion may, by passing a resolution to that effect, readmit to dealings on the Exchange the securities of a Company whose admission to dealings had been previously withdrawn.

Dealings in Specific Bargains, Provisional Documents and dealings in any security or securities admitted to the Official List shall be subject to such margin requirements or such other requirements as the OTC Committee may from time to time prescribe in addition thereto or in modification thereof.

The margin to be furnished by a Member under these Bye-laws and Regulations shall be provided by a deposit of cash or it may be provided in the form of a Deposit Receipt of a Bank approved by the OTC Committee or in securities approved by it subject to such terms and conditions as it may from time to time impose. Deposits of cash shall not carry interest and the securities deposited by a Member valued at the ruling market price shall exceed the margin amount for the time being covered by them by such percentage as the OTC Committee may, from time to time prescribe.

The Member depositing Margin in the form of securities shall always maintain the value thereof at not less than the margin amount for the time being covered by them by providing further security to the satisfaction of the OTC Committee which shall always determine the said value and whose valuation shall conclusively fix the amount of any deficiency to be made up from time to time.

The margin shall be held by the Exchange and when they are in the form of Bank Deposit Receipts and securities such Receipts and securities shall be transferred to such persons or to the name of a Bank approved by the OTC Committee solely for and on account of the Exchange, without any right whatsoever on the part of the depositing Member or those in its right to call in question the exercise of such discretion.

A Member depositing margin under the provisions of these Bye-laws, Rules and Regulations shall when required to do so, sign a Letter of Declaration in such form or forms as the OTC Committee may, from time to time prescribe in addition thereto or in modification or substitution thereof.

The monies, Bank Deposit Receipts and other securities and assets deposited by a Member by way of margin, under the provisions of these Bye-laws, Rules and Regulations, shall be subject to a first and paramount lien for any sum due to OTC Exchange by it and for the due fulfillment of its engagements, obligations and liabilities arising out of or incidental to any bargains, dealings, transactions and contracts made subject to the Rules, Bye-laws and Regulations of the Exchange or anything done in pursuance thereof.

In the event of a Member being declared a defaulter, the margin deposited by him shall forthwith stand forfeited to the Exchange. The Margin Deposit so forfeited or the proceeds thereof shall be appropriated towards the dues of the Exchange and against the claims of creditor Members which have been admitted by the Default Committee as provided in these Bye-laws, Rules and Regulations.

The OTC Committee may suspend a Member/Dealer from dealing on the Exchange, in the event of his failing to deposit margin as provided in the Bye-laws, Rules and Regulations. A notice of such suspension shall be immediately displayed on the quotation system and the suspension shall continue until the margin required is duly deposited.

A Member shall not directly or indirectly enter into any arrangement or adopt any procedure for the purpose of evading or assisting in the evasion of the margin requirements prescribed under these Rules, Bye-laws and Regulations.

If a Member assists another in evading the margin regulations and any one of them is declared a defaulter the other shall be liable to pay to the Default Committee for the benefit of Creditors of the defaulter, the amount of margin that the Defaulter would have otherwise deposited with the Exchange in accordance with these provisions. The amount so payable by such Member shall be in addition to any other penalty that may be imposed on him by OTC Committee/Board.

Save as otherwise provided, brokerage shall be charged and collected by Members upon the execution of all put through deals in respect of purchase or sale of OTC securities. Members are entitled to charge brokerage at rates not exceeding the official scale prescribed by the Exchange/OTC Committee or such other scale as may be prescribed by the said Committee from time to time.

A Member buying securities on which calls have been prepaid by the seller may charge brokerage on the purchase price with the amount of such calls added.

Unless otherwise determined and restricted by the OTC Committee, a Member may, in its discretion, charge such brokerage or commission for underwriting or placing or entering into any preliminary arrangement in respect of any flotation of new issues or Offer for Sale of any security as it may agree upon with the issuer or offerer or with the principal underwriters or Members engaged by such issuer or offerer, subject to underwriting guidelines and brokerage guidelines as prescribed by the Exchange from time to time.

Unless otherwise determined and restricted by the OTC Committee, brokerage or commission on all tenders or applications by or through Members for subscription or purchase in respect of any flotation of new issue or Offer for Sale of any security, shall be on the terms offered by the issuer or offerer or by the principal underwriters or Members engaged by such issuer or offerer.

No allowance, rebate, return or division of brokerage or commission of any nature or character shall be made by a Member to any constituent in respect of any deal or to any applicant whose tender or application for subscription or purchase has been submitted by or through it or to any other person except as hereinafter provided.

For purposes of these provisions, a Member shall not act as a principal or enter into any agreement or arrangement with a non-member whereby special and unusual rates are given without intent to give special or unusual advantage to such non-Member for the purpose of securing its custom or business.

(a) A Member may share brokerage as provided in sub-clause (b) below with an authorised signatory or employee in its own exclusive employment. A Member may similarly share brokerage with any other person including an investor provided such person:

(i) is not one for or with whom Members are forbidden to do business under the Bye-laws, Rules and Regulations of the Exchange.

(ii) is not a Member, authorised signatory or employee in the employment of another Member;

(iii) does not advertise, in the public press or any other manner that he is acting as a broker;

(iv) does not pass credit receipts contract notes in his own name or issue price lists or pamphlets or circulars in respect of business in securities;

(v) does not issue price lists or pamphlets or circulars in respect of business in securities to persons other than his own investors.

A Member may pay its authorised signatory or any other employee or other person sharing brokerage as provided in (a) above, a share of brokerage not exceeding such percentage as may be prescribed, of brokerage charged to the investor introduced by him.

An authorised signatory, employee or other person sharing brokerage shall not make any allowance, rebate or return of such brokerage directly or indirectly to the investor introduced by him or to any other person or agent.

In the absence of an agreement in writing to the contrary, an authorised signatory, employee or any other person sharing brokerage shall be deemed to have agreed to give a full and complete indemnity to the Member with whom he shares brokerage for any loss which such Member may sustain by the default of the constituent (provided such constituent is not a Member of the Exchange) introduced by him in fulfilling his obligations.

In the event of any default by a constituent, the authorised signatory, employee or other person introducing the defaulting constituent shall be liable to the employing Member.

If the authorised signatory, employee or other person sharing brokerage fails to pay the amount due by the defaulting constituent introduced by him then, at his risk and cost, the Member shall be entitled to take such proceedings against the defaulting constituent and/or make such settlement or compromise with him as it in its discretion deem advisable. The acceptance of a promissory note from the defaulting constituent, for the whole or part of the amount due from him shall not release the authorised signatory, employee or any other person sharing brokerage from his liability to pay to the member the original amount due from the defaulting constituent nor shall any settlement or compromise with the defaulting constituent diminish the liability of the authorised clerk, employee or other person sharing brokerage who shall pay to the Member the unrealised balance of the original amount due from the defaulting constituent and the costs and expenses incurred in the course of realisation.

Any dispute between a Member and an authorised signatory, employee or other person sharing brokerage with it in respect of any matter to which sub-clauses (d), (e) and (f) above apply shall be referred to arbitration and decided in accordance with the Bye-laws, Rules and Regulations relating to arbitration of disputes other than between Members. All other disputes between them shall also be referred to arbitration in the same manner but if the authorised signatory, employee or other person sharing brokerage so desires such disputes may be, with the permission of the OTC Committee, referred to arbitration and decided in accordance with the Bye-laws, Rules and Regulations relating to arbitration or disputes between Members.

The Exchange does not recognise to any deal, parties other than its own Members and constituents (unless it is a put-through deal between Members) Each Member shall directly and primarily be liable to every other Member and constituents with whom such Member effects a deal, for its due fulfillment, in accordance with these Bye-laws, Rules and Regulations, whether such deal be for the account of the Member effecting it or for the account of a constituent / principal.

All deals in securities on the Exchange in which dealings are permitted, shall in all cases be deemed to have been made subject to these Bye-laws, Rules and Regulations as may be amended and announced by the Exchange from time to time and which shall be part of the terms and conditions of all such deals.

(a) An application to annul a deal on the Exchange, can be made either by an investor or by a Member in the form prescribed in that behalf to the OTC Committee on any of the following grounds: Specific allegation of coercion, undue influence, fraud, misrepresentation or upon prima facie evidence of such material mistake in the deal.

(b) Upon an application being made as aforesaid to the OTC Committee, if the OTC Committee is satisfied that the aforesaid grounds exist and that the deal in question should be annulled on that ground, the OTC Committee shall annul the said deal by passing a resolution to that effect and the resolution so passed shall be final and shall come into force forthwith.

Members carrying on business on the Exchange shall be entitled to make deals in the market in their own name or for the purpose of market making. Members shall also be entitled to act as Representatives on behalf of other Members.

When a Member employs another Member as an intermediary to put through the transaction of an investor, such an intermediary shall report the transaction to the employing Member at the same price as dealt with in the market and the employing Member shall report the same price to the investor in respect of such transaction.

When a Member has an order to buy and an order to sell the same kind of security, the Member may complete the transaction between the investors concerned and may at its discretion deliver the securities which are received from the selling investor either to the buying investor who is the direct contracting party in respect of such securities or to any other buyer who is entitled under these Bye-laws, Rules and Regulations to receive from such Member delivery of securities of a like kind.

Members will not conduct deals except under the limits, Rules and Regulations that would be announced by the OTC Committee from time to time. Non-compliance may invite penalties extending upto suspension of Membership. The OTC Committee will have sole discretion to devise such rules as it may deem fit in this regard.

Members shall be subject to SEBI (Insider Trading) Regulations, 1993 and any other directives issued by SEBI from time to time in respect of their dealings on the Exchange.

a) The Exchange shall maintain Settlement Guarantee Fund(s) in respect of all or different clearing segment(s) for such purposes as may be prescribed by the Exchange from time to time.

b) Subject to the other provisions of the Rules and Bye-laws of the Exchange, the object of the Fund shall be to guarantee, in accordance with the Rules of the Exchange, the settlement of bonafide transactions of Members of the Exchange inter se through the Exchange and which form part of the Exchange�s clearing and settlement system, but shall not guarantee title, ownership, genuineness, regularity and validity of documents delivered or received, including company objections, negotiated deals, in-house deals, off market deals, deals which are settled outside the Exchange�s clearing mechanism (including the Exchange appointed clearing house(s), if any) and deals which are not in line with the Exchange�s settlement procedure.

c) The Exchange may prescribe from time to time the norms, procedures, terms and conditions governing each Settlement Guarantee Fund which may inter alia specify the amount of deposit or contribution to be made by each Member to the relevant fund, the terms, manner and mode of deposit or contribution, condition of repayment of deposit or withdrawal of contribution from the fund, charges for utilisation, penalties and disciplinary actions for non-performance thereof.

a) Each Member shall be required to contribute to and/or provide a deposit as may be determined from time to time by the Exchange to the relevant Settlement Guarantee Fund which shall be held by the Exchange or such other entity as may be decided by the Exchange from time to time, to be applied as provided in these Bye-laws and the Rules;

b) The Exchange may specify the amount of contribution and/or deposit to be made by each Member and/or category of Members which may include inter alia, the minimum amount to be provided by each Member;

c) The Exchange may also specify such additional contribution and/or deposit that shall have to be provided towards the Settlement Guarantee Fund from time to time to form part of the Settlement Guarantee Fund;

d) Contributions by the Exchange of such amounts to the Settlement Guarantee Fund as may be decided by the Board of Directors or by a sub-committee of the Board as may be constituted for the purpose of the Settlement Guarantee Fund from time to time shall form part of the Settlement Guarantee Fund;

e) Interest income or such other income arising from investments of the amount comprising the Settlement Guarantee Fund and accretions thereto including the interest earned on the Exchange�s contribution in the form of a temporary advance shall form part of the Fund;

f) income from such portion of penalties, fines and turnover charges as may be decided by the Board of the Exchange from time to time;

g) any other income as may be decided by the Board of the Exchange or by a sub-committee of the Board as may be constituted for the purpose of the Settlement Guarantee Fund from time to time.

The Exchange shall prescribe from time to time the form of contribution or deposit to the corpus of the relevant Settlement Guarantee Fund which may either be in the form of cash, securities, fixed deposit(s) or bank guarantee(s) or in such other form/mode and subject to such terms and conditions as may be specified from time to time.

The Board of Directors/SGF Committee/OTC Committee/Default Committee / Managing Director of the Exchange may take such action as it thinks fit and proper against a Member who fails to pay any amount payable by him to the Settlement Guarantee Fund including action by way of suspension of the business or membership of the Member, fine, declaring the Member as a defaulter and/or expulsion from the membership of the Exchange.

Explanation: For the purposes of this clause, an amount payable by a Member shall also include all amounts payable by a Member for short delivery by him and these shall be deemed to be amounts payable by the Member in respect of transaction(s) entered into by him.

Where a Member is declared a defaulter, the provisions of the Bye-laws of the Exchange in respect of Default shall become applicable.

By giving a suitable notice to the Exchange and subject to such conditions as may be specified by the Exchange from time to time, a Member may withdraw qualifying securities from pledge or may cause the Exchange to revoke an acceptable letter of credit or bank guarantee or withdraw the Fixed Deposit which secured the Member�s contribution/deposit to the Settlement Guarantee Fund, provided that the Member has, effected simultaneously with such withdrawal or revocation, deposited cash with or pledged qualifying securities to the Exchange or through such other mode as may be approved by the Exchange from time to time to satisfy the Member�s required contribution or deposit.

a) The Settlement Guarantee Fund shall be utilised solely in the event of a Member being declared a defaulter and for such other purposes as may be provided in these Bye-laws and/or Rules, directives of the Exchange and subject to such conditions as the Exchange may prescribe from time to time, which shall inter alia, include the following:

i. to defray the expenses of creation, maintenance and repayment of the Settlement Guarantee Fund;

ii. to invest in such approved securities and other instruments, subject to such terms and conditions as may be decided by the Exchange from time to time;

iii. to meet premia on insurance cover(s) which the Exchange may take from time to time;

iv. to satisfy any loss or liability of the Exchange arising out of clearing and settlement operations of such deals as provided in the Bye-laws and Business Rules;

v. to repay the balance after meeting all obligations under the Bye-laws and Business Rules to the Member when he ceases to be a Member pursuant to the provisions regarding the repayment of contribution/deposit;

vi. any other purpose as may be specified by the Board or by a sub-committee of the Board as may be constituted for the purpose of the Settlement Guarantee Fund from time to time.

aa. In the event a member fails to meet obligations to the Clearing House of the Exchange arising out of clearing and settlement operations of such deals as provided in the Bye-laws and Regulations, the relevant authority may utilize the Settlement Guarantee Fund and other monies to the extent necessary to fulfill the obligations under such terms and conditions as the relevant authority may specify from time to time.�

1. The Settlement Guarantee Funds may be utilized for meeting the shortages arising out of non-fulfilment/partial fulfilment of the funds obligations by the Members in a settlement before declaring the concerned member defaulter subject to the following:

In cases where amount of shortages are in excess of the base minimum capital (BMC) prescribed, the trading facility of the member is withdrawn and the securities pay �out due to the member is withheld. In cases where the amount of shortages exceed 20% of the BMC and is less than the BMC on six occasions within a period of three months, the trading facility of the member is withdrawn and the securities pay �out due to the member is withheld. On recovery of the complete shortages, the member is permitted to trade with a reduced gross exposure as mentioned in the table below:

This reduced gross exposure level is maintained for a period of ten rolling settlements. If the cumulative funds shortages for the next ten rolling settlements is less than 20% of BMC, the exposure limits shall be restored. The exposure limit may be restored if a member provides a cash deposit equivalent to his cumulative funds shortages as the �funds shortage collateral� in his clearing account. Such deposit will be kept with the Exchange for a period of ten rolling settlements and will be released only if no further funds shortages are reported for the member in next ten rolling settlements. There is no exposure benefit nor any interest payment on this amount so deposited as �funds shortage collateral�. Members may deposit the �funds shortage collaterals� by way of cash, FDR or bank guarantee. [Sub-clause -aa(1) amended as per the directive of SEBI on June 5, 2003 and Board Resolution passed at the 66th meeting held on August 7, 2003].

2. The outstanding amount would carry a penal interest of not less than 0.07% per day.[Sub-clause - aa(2)� amended as per the directive of SEBI on June 5, 2003 and Board Resolution passed at the 66th meeting held on August 7, 2003].

b) Save as otherwise expressly provided in the Bye-laws and Rules, the Settlement Guarantee Fund shall not be utilised for any other purpose.

c) The Exchange shall have full power and authority to pledge, re-pledge, hypothecate, transfer, create a security interest in or assign any or all of the (i) Settlement Guarantee Fund cash (ii) securities or other instruments in which Settlement Guarantee Fund cash is invested and (iii) qualifying securities pledged by a Member, bank guarantee(s) or letters of credit or any other instrument issued on behalf of a Member in favour of the Exchange towards deposit to the Settlement Guarantee Fund.

a) The Board of Directors of the Exchange shall constitute an independent Committee, called the �SGF Committee� empowering it to take decisions on all matters concerning the management and administration of the Fund. The constitution/re-constitution of the �SGF Committee� will be subject to the approval of the Securities and Exchange Board of India.

b) Subject to the Rules and Bye-laws of the Exchange and any other directions and instructions of the Exchange, the independent SGF Committee shall exercise control over the management and administration of the Fund. In addition to the powers conferred by the other provisions of the Rules, Bye-laws of the Exchange, the said Committee shall be vested with all powers, authorities and discretions necessary or expedient for or incidental to the management and administration of the Fund or for achieving the object and purpose of the Fund as may be delegated by the Board of Directors of the Exchange from time to time.

c) Without prejudice to the generality of the foregoing and the powers already vested with the OTC Committee/Managing Director for declaring a Member a defaulter, the SGF Committee shall delegate any of the following powers and functions to the Default Committee of the Exchange:

i. Summon Members, partners of Members, dominant shareholders / directors of Members, who are companies or other corporate bodies to appear before it for the purpose of seeking/obtaining clarifications;

ii. call upon Members, partners of Members and dominant shareholders/directors of Members who are companies or other corporate bodies to furnish such information, documents and papers as may be required and within the period specified;

iii. prescribe forms, agreements, affidavits, undertakings and other writings to be signed by Members, partners of Members, dominant shareholders/directors of Members who are companies or other corporate bodies or by other persons and specify the period within which the same should be signed and submitted;

iv. delegate any of its powers and functions to one or more sub-committees comprising of one or more members of its members and/or delegate any of the administrative powers and functions to one or more officials of the Exchange, subject to such terms and conditions as it may think fit to impose but subject to its overall ratification;

v. to decide on the procedures to be adopted for application and distribution of the assets of the Member as per the provisions of the Bye-laws of the Exchange in respect of default.

ii. to realise or otherwise deal with any security or other property offered to the Fund;

iii. to borrow money without security or against the security of the Fund or any property of or available to or accessible by the Fund or otherwise;

iv. to enter into financial arrangements with banks, institutions, companies and other persons;

vi. to do all such acts as it considers necessary to protect or advance the interest of the Funds or to achieve the purposes and object of the Fund;

vii. to refer any matter as it deems necessary to the Default Committee/Managing Director;

viii. delegate any of its powers and functions to one or more sub-committees of the Exchange and/or delegate any of the administrative powers and functions to one or more officials of the Exchange, subject to such terms and conditions as it may think fit to impose but subject to its overall ratification;

ix. to withdraw appropriate amounts out of the Fund and remit the proceeds to the Exchange consequent to a Member being declared a defaulter, which amount shall be equal to the amount which the Exchange had initially contributed out of its own funds for the purpose of meeting the defaulter Member�s obligations and includes interest accrued thereon.

The Exchange and/or the SGF Committee shall endeavour to ensure that the value of the Fund at any point of time shall not fall below the initial corpus of the Fund i.e. Rs.3 crores or 75% of the closing value of the corpus of the Fund as on the immediately preceding 31^st March calculated on the basis of the requisite amount of the base minimum capital of the outstanding Members enabled to trade on the various segments covered under the Settlement Guarantee Fund, whichever is higher or such other amount as the Board of Directors or a sub-committee of the Board as may be constituted for the purpose of the Settlement Guarantee Fund, may from time to time specify.

a) Save as otherwise expressly provided in the Bye-laws, the value of the Fund at any point of time shall not be less than the minimum value as prescribed by the Board of Directors or by a sub-committee of the Board as may be constituted for the purpose of the Settlement Guarantee Fund from time to time under these Bye-laws.

b) In the event of the value of the Fund decreasing to less than the prescribed minimum value under these Bye-laws, then the Exchange shall within fifteen business days, send a notice to all Members of the Exchange informing them of the same.

c) In the event of the value of the Fund becoming less than the minimum value under these Bye-laws, the Board of Directors of the Exchange or a sub-committee of the Board as may be constituted for the purpose of the Settlement Guarantee Fund shall forthwith and in any event within four weeks of the date of the value of the Fund falling below such minimum value, take such steps as it deems fit to ensure that the value of the Fund is increased to a value which is not less than the prescribed minimum value:

i. by contributions from outstanding Members enabled to trade, equitably or otherwise; or

iii. in such other manner as the Board of Directors or a sub-committee of the Board as may be constituted for the purpose of the Settlement Guarantee Fund may decide from time to time.

d) The above provision of these Bye-laws shall not prejudice the powers of the Board of Directors or the SGF Committee to call from time to time, for additional contributions from the Members even when the value of the Fund is above the minimum value.

In the event a Member fails to meet the clearing and settlement obligations to the Exchange arising out of clearing and settlement operations of such deals as provided in these Bye-laws and Business Rules and the Member is declared a defaulter, the Exchange may utilise the Settlement Guarantee Fund and other monies to the extent necessary to eliminate the obligation, in the following order:

a) any amount that may be paid in the form of margin or any other payment of the defaulting Member retained by the Exchange for the purpose of the clearing and settlement, if this amount is not sufficient to settle the obligation;

b) any contribution or deposit made by the defaulting Member to the Settlement Guarantee Fund, whether in the form of cash or fixed deposit receipt(s) or securities or in any other form/mode towards Base Minimum Capital, if this amount is not sufficient to settle the obligation;

c) the amount of further contribution/deposit made or bank guarantee arranged in the form of Additional Base Minimum Capital, if any, by the defaulting Member to the Exchange to the extent not appropriated by the Exchange towards the obligations of the defaulting Member to it, if this amount is not sufficient to settle the obligation;

d) the fines, penalties, penal charges, auction difference, interest on delayed payments, interest or other income, if any, earned by investment or dis-investment of Settlement Guarantee Fund; if the amount is not sufficient to settle the obligation;

e) the interest/income accrued on the Settlement Guarantee Fund, including the interest earned on the Exchange�s contribution to the Fund in the form of a temporary advance;

f) the amount of contribution and deposit made by all categories of Members to the Settlement Guarantee Fund in proportion to the total contribution and deposit made by each Member towards Base Minimum Capital;

g) If the above amount is not sufficient, the balance obligation remaining after application of the above funds shall be assessed against all the remaining Members in the same proportion as their total contribution and deposit and Members shall be required to contribute or deposit in the Settlement Guarantee Fund, within such time as the Exchange shall require, the deficient amount.

Provided that the contributions/deposit made by a Member or any bank guarantee arranged by the Member towards the Additional Base Minimum Capital shall be utilised only in case of default of the concerned Member and not in case of default of any other Member and only for paying the creditors of that Member and not for paying the creditors of any other Member.

a) If a pro-rata charge is made as mentioned in the above provision against a Member�s actual contribution or deposit and as a consequence the Member�s remaining contribution and deposit towards the Settlement Guarantee Fund is less than his required contribution and deposit, the Member shall contribute or deposit in the Settlement Guarantee Fund, within such time as the Exchange shall require the deficient amount.

b) If the Member fails to contribute/deposit the deficient amount as mentioned in sub-clause (a) hereinabove, the Exchange may charge such interest, impose penalties and fines and take such disciplinary action against the Member as it may determine from time to time. Any disciplinary action which the Exchange authority takes pursuant to the above provisions or involuntary cessation of Membership by the Member shall not affect the obligation of the Member to the Exchange or any remedy to which the Exchange may be entitled under applicable law.

Each Member�s contribution and/or deposit towards the Settlement Guarantee Fund shall be allocated by the Exchange among the various segments which are designated as such by the Exchange and in which the Member participates, in such proportion as it may decide from time to time. The Exchange shall retain the right to utilise the fund allocated to a particular segment to the satisfaction of losses or liabilities of the Exchange incident to the operation of that segment or for any other segment as may be decided by the Exchange at its discretion.

a) Member shall be entitled to the repayment of contribution/deposit made by him to the Settlement Guarantee Fund after:

ii. all pending deals at the time the Member ceases to be a Member which could result in a charge to the Settlement Guarantee Fund have been closed and settled; and

iii. all obligations to the Exchange for which the Member was responsible while he was a Member have been satisfied or at the discretion of the Exchange have been deducted/recovered by the Exchange from the Member�s actual contribution/deposit, provided however that the Member has submitted to the Exchange such indemnities or guarantees as the Exchange may deem necessary to call from time to time or another Member has been substituted on all deals and obligations of the Member; and

iv. a suitable amount as may be determined by the Exchange at its discretion has been set aside to provide for any loss that may arise from any company objections in respect of the delivery of securities made by the said Member; and

v. a suitable amount as may be determined by the Exchange at its discretion towards such other obligations as may be perceived by the Exchange to exist or maybe perceived to arise in future.

b) The Exchange may specify provisions for the repayment of contribution/deposit including the manner, amount and period within which it will be paid but at no point of time will the repayment exceed the actual contribution/deposit available to the credit of the member after deducting the necessary charges from the same.

c) Any obligation of a Member to the Exchange that remain unsatisfied at the time the Member ceases to be a Member, shall not be affected by such cessation of Membership.

Any salvage or recovery made by the Exchange, whether in part or full, through the process of insurance claim or any other mode shall be utilised by Exchange / SGF Committee towards appropriation of obligations of Member declared as defaulter.

The liability of the Exchange shall be limited to the extent of contributions available from the Settlement Guarantee Fund. The Exchange shall not be liable for obligations of a non-Member, obligations of a Member to a non-Member, obligations of a Member to another Member of the Exchange towards deals which are not covered under the Settlement Guarantee Fund or obligations to a constituent by a Member and to losses in connection therefrom.

Any dispute, unsettled claim, difference or controversy between the Exchange/SGF Committee/Default Committee and a Member/defaulter Member, arising out of or in connection with any amount payable or alleged by the Exchange/SGF Committee/Default Committee as being payable by the Member/defaulter Member to the Exchange/SGF Committee/Default Committee/SGF Fund shall be referred to the Arbitration Committee of the Exchange or to the arbitration of such person/(s) as the Managing Director may nominate in this behalf and the same shall be subject to the provisions of the Arbitration and Conciliation Act, 1996 and the Bye-laws and Rules of the Exchange.

Unless the Board of the Exchange otherwise directs, the accounts of the Fund shall be prepared and maintained as a part of the accounts of the Exchange and shall be audited as a part of the accounts of the Exchange.

Upon the SGF Committee of the Exchange being satisfied that the value of the Fund is sufficient for the Fund to become operational (which value shall not be less than the value mentioned in clause 08 of this chapter), it shall specify a date as the date on which the Fund becomes operational or delegate the power to specify such date to the Managing Director of the Exchange.

a) Save as otherwise specifically provided in the Bye-laws and Rules prescribed by the Exchange with regard to clearing and settlement arrangements, in promoting, facilitating, assisting, regulating, managing and operating the clearing and settlement functions of the Exchange, the Exchange shall not be deemed to have incurred any liability and accordingly no claim or recourse in respect of or in relation to any dealing in securities or any matter connected therewith shall lie against the Exchange/agency or against any authorised person(s)/agency acting for the Exchange.

b) No claim, suit, prosecution or other legal proceedings shall lie against the Exchange or any authorised person(s)/agency acting for Exchange in respect of anything which is done in good faith or intended to be done in pursuance of any order or other binding directive issued to the Exchange under any law or delegated legislation for the time being in force.

⁹Inserted by the Board of Directors Resolution dated September 25, 1998 and approved by SEBI on October 9, 1998.

Members shall maintain a consolidated bank account for all clients which shall be separate from his own account. This account will be titled as Clients� Account.

The Members shall maintain separate accounts so as to distinguish the monies received from or on account of and moneys paid to or on account of each of his clients and the moneys received and the moneys paid on his own account. Further the Member shall compulsorily make payment/receive moneys from/into his own account for all transactions entered into by him as a principal.

Members should maintain separate books of account to distinguish the Clients� securities from his own securities and the monies received / paid on account of clients and on their own account. The books of account maintained by Members on account of clients would help to distinguish the money paid by each client.

The books of account to be maintained by Members should be in accordance with Rule 15 of the Securities Contracts (Regulation) Rules, 1957 and Regulation 17 of the Securities and Exchange Board of India (Stock Brokers and Sub Brokers) Regulations, 1992.

03. Books of Account pertaining to clients should interalia provide for the following

(iii) Securities received for transfer or sent for transfer by the Member in the name of the client or his nominee(s);

(iv) Securities that are fully paid for and are held in custody by the Member as security. Proper authorisation from client for the same shall be obtained by the Member;

(v) Fully paid for Clients� securities registered in the name of Members, if any, towards margin requirements.

(ii) Such money belonging to the Member as may be necessary for the purpose of opening or maintaining the account;

(iii) Money for replacement of any sum which may by mistake or accident have been drawn from client�s account in contravention of Clause 5 hereinbelow;

(iv) A cheque/draft received by a Member representing in part money due to the client and in part money due to the member.

(i) Money which is required for payment to or on behalf of clients or for or towards payment of a debt due to the Member;

(iii) Money in respect of which there is a liability of clients to the Member provided the money so drawn does not exceed the total of the money so held for the time being for each such client;

(iv) Such money belonging to the Member as may have been paid into the client�s account under 4 (ii) and (iv) mentioned above;

(v) Money which may, by mistake or accident have been paid into such account in contravention of Clause 4 above.

Nothing mentioned hereinabove shall deprive a Member of any recourse or right by way of lien, set-off, counter claim, charge or otherwise against moneys standing to the credit of clients� account.

A client shall pay to the trading member direct all sums, which the trading members is liable to pay, on behalf of the client to the Exchange/Clearing Agency. Such payment must be made at least one banking day prior to the date of which the trading member is required to make payment to the Exchange or Clearing Agency towards pay-in, in compliance with the provisions in these Bye-laws and rules relating to such payment.

Member shall issue to the client a contract note for all transactions within 24 hours of the execution of the contract.

The Exchange shall clear and settle the trades on a sequential basis i.e. the pay-in and the pay-out of the first settlement shall be completed before the commencement of the pay-in and pay-out of the subsequent settlement/s.

The Exchange shall follow a strict time schedule to ensure that the settlements are completed on the same day.

The Clearing house of the Exchange shall execute Auto DO facility for all the settlements together, so as to make the funds and the securities available with the member on the same day for all the settlements, thereby enabling the availability of the funds/securities at eh client level by the end of the same day. The members shall be required to transfer the securities from their respective pool account to the respective beneficiary account of their clients within 1 working day after the pay out day. The securities lying in the pool account beyond the stipulated 1 working day shall attract a penalty at the rate of 6 basis point per week on the value of securities.[Modified as per the resolution passed at the seventy-second Board Meeting held on 19.07.2004 and approved by SEBI vide letter No.MRD/DSA/OTCEI/17880/2004 dated August 13,2004]

Member may, at his discretion prescribe margin limits to be furnished by the clients before undertaking any sale or purchase of securities on behalf of his clients. In case the Member wishes to prescribe margins, then he should atleast take a minimum of 20% of the price of the securities proposed to be purchased / sold.

However, a Member may waive the margins if he is satisfied that the respective client has sufficient credit balance against his name or has deposited the relevant share certificates alongwith duly executed valid transfer deed to the Member.

January - 2008

CONTENTS

i) Cash to be deposited with the Exchange- minimum 25 %

iii) Cash/FDR/Bank Guarantee/Securities � Maximum of 75%