OTC EXCHANGE OF INDIA

Ref::  1468/OTC/2004/67                                                                            

Date: May 10, 2004

  Dear Members/Dealers,

 Sub. : Settlement of transactions in the case of holidays

 SEBI has issued circular no. SEBI/MRD/Policy/AT/Cir-19/2004 dated April 21, 2004 relating to settlement of transactions in the case of holidays. The relevant provisions of the aforesaid SEBI circular is given below:

1. It has often been noticed that the holidays of the banks and the Stock Exchanges are not common. Further, in view of the provisions of the Negotiable Instruments Act, 1881, the holidays across stock exchanges situated in different states are also not common. This lack of uniformity of holidays and force majeure conditions which necessitate sudden closure of one or more Stock Exchanges and banks in a particular state result in situations where multiple settlements have to be completed by the Stock Exchanges on the working day immediately following the day(s) of the closure of the banks.

2. With a view to facilitate the smooth completion of settlement process and help members of the Stock Exchanges meet their obligations in a timely manner under such circumstances, the Stock Exchanges/ Depositories are advised to follow the guidelines and adhere to the time line laid down in this circular. These guidelines are based on the recommendations of the Advisory Committee on Derivatives and Market Risk Management (RMG) and have been finalized in consultation with the Stock Exchanges and the Depositories.

2.1  The Stock Exchanges 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.

2.2  The cash/Securities pay out from the first settlement shall be made available to the member for meeting his pay-in obligations for the subsequent settlement/s.

2.3  Further, in order to meet his pay-in obligations for the subsequent settlement, the member may need to move securities from one depository to another. The Depositories shall, therefore, facilitate the inter-depository transfers within one hour and before pay-in for the subsequent settlement begins.

2.4  The Stock Exchanges/Depositories shall follow a strict time schedule to ensure that the settlements are completed on the same day.

2.5  The Clearing Corporation/Clearing House of the Stock Exchanges 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 the client level by the end of the same day.

 3.  SEBI vide circular no. SMDRP/Policy/Cir-05/2001 dated February 01, 2001, had stipulated a time limit of 4 calendar days or 2 working days, whichever is later, for transferring the securities from the member’s pool account to the beneficiary accounts of clients. Also, SEBI vide circular No. SMD/Policy/Cir-6/2003 dated February 6, 2003 has stipulated the brokers to distribute the pay-out of securities and funds within 24 hours to their clients. Hence, with a view to harmonize the time limit for the pay-out from the pool account of the member to the client account, it is now clarified that, in partial modification of SEBI circular no. SMDRP/Policy/Cir-05/2001 dated February 01, 2001, the stock brokers/clearing members shall be required to transfer the securities from their respective CM 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 day shall attract a penalty at the rate of 6 basis point per week on the value of securities.

 Members/Dealers are requested to take note of the above.

For OTC Exchange of India

R.Anand

Asst. Vice President