EQUITY CASH SEGMENT DETAILED CONSOLIDATED CIRCULAR CONTENTS

Transcription

1 EQUITY CASH SEGMENT DETAILED CONSOLIDATED CIRCULAR CONTENTS Sr. No. Particulars Page No. 1. DEALS 3 2. LIQUID ASSETS Composition of Liquid Assets Additional Liquid Assets Procedure for depositing collaterals towards Liquid Assets Procedure for release of Liquid Assets Transfer of collateral from one segment to another segment 7 3. MARGINS Margin process Value at Risk (VaR) margin Extreme Loss Margin (ELM) Mark to Market (MTM) margin Additional margins Collection of margins Exemption from margins Release of blocked margins Margin shortfall Maintenance of capital cushion Cross Margining CLEARING & SETTLEMENT Settlement Schedule Settlement Process Securities Pay-in and Pay-out Process Funds Pay-in and Pay-out Process Physical Securities Settlement Objection Company Objections Clearing Bank GUIDELINES FOR GOOD/BAD DELIVERY MAINTENANCE OF DEPOSITORY ACCOUNT CORE SETTLEMENT GUARANTEE FUND Core Settlement Guarantee Fund Contribution towards Core Settlement Guarantee Fund 37 1

2 8. ANNEXURES I Format of letter from Clearing Member for submission of 39 FDR receipt II Fixed Deposit Receipts (FDRs) confirmation by bank 40 III Renewal of Fixed Deposit Receipts (FDRs) by bank 41 IV Format of letter from Clearing Member for submission of 42 renewal of FDR V Format for Bank Guarantee 44 VI Format of letter from Clearing Member for depositing Bank 49 Guarantee VII Format for Renewal of Bank Guarantee by bank 50 VIII Format of letter from Clearing Member for submission of 53 renewal of Bank Guarantee IX Deed of Pledge 54 X Procedure for deposit and withdrawal of Government of 62 India Securities (G-Sec)/T-Bills as collateral towards Liquid Assets in Equity Cash Segment XI Extension of Bank Guarantee to Different trading segment 66 XII Example of member s gross open position for the purpose of 68 VaR & ELM margins XIII Methodology for computation of MTM Margin 69 XIV Procedure for early pay in 70 XV Norms for imposing fines/penalties on Clearing Members in 72 case of de-activation of trading terminals XVI List of Clearing Banks 73 XVII Format of authorization letter to clearing bank for debiting 74 settlement account XVIII Norms for imposing late fees/fines/penalties on members for 75 non-fulfilment of funds obligations XIX Format of letter from Clearing Member regarding shifting 76 settlement account from one designated Clearing Bank to another 2

3 1. DEALS Deals executed on the Equity Cash Segment of BSE Ltd. are eligible to be cleared and settled through Clearing Corporation in the Equity Cash Segment unless specifically deferred or not allowed to, or rejected from admission by the relevant authority. 3

4 2. LIQUID ASSETS (Collateral Deposits) The liquid assets for trading in equity Cash Segment are to be maintained separately. 2.1 Composition of Liquid Assets Clearing Members of the Equity Cash Segment may deposit liquid assets in form of cash and cash equivalent i.e. Bank Guarantees, Fixed Deposit Receipts of scheduled commercial banks, eligible Government Securities, eligible Liquid Mutual Fund Units and non-cash equivalent i.e. eligible securities, eligible Mutual Fund Units (other than Liquid Mutual Fund) and in any other form of collateral as may be prescribed by the Indian Clearing Corporation Ltd. (ICCL / Clearing Corporation) from time to time. List of eligible securities and mutual fund units is available on web-site of BSE Ltd. (BSE) / ICCL. The cash/cash equivalent component should be at least 50% of the total liquid assets. Further, the Liquid Assets deposited in form of cash equivalent and non-cash equivalent are subject to applicable norms in respect of haircuts, single bank and single issuer exposure limits, etc. as per the guidelines issued by Securities and Exchange Board of India (SEBI), BSE and ICCL as well as any other circulars/guidelines that may be issued in respect of the same from time to time. 2.2 Additional Liquid Assets Clearing members may deposit additional liquid assets at any point of time based on the composition of Liquid Assets as detailed in 2.1 above. 2.3 Procedure for depositing various types of collateral deposits towards Liquid Assets Cash Deposits For depositing cash towards liquid assets, the Clearing Members need to send their online instruction in respect of the same through the BSE Electronic Filing System (BEFS) Module to their respective Clearing Banks for confirmation of such request for enhancement of cash collateral. ICCL has provided an on-line facility (BEFS) to members for sending instructions to Clearing Banks for enhancement of cash collateral. Through the said BEFS facility, Members can place their on-line requests to their designated Clearing Bank during the specified timings for enhancement of cash collateral for the relevant segment of the Exchange. The concerned Clearing Banks have also been provided the on-line webbased facility (BEFS) for confirmation of such cash collateral enhancement requests. Based on the request forwarded by the Member, the respective Clearing Banks may confirm or reject the enhancement of cash collateral request received by them. Fixed Deposit Receipts (FDRs) Clearing Members can deposit FDR(s) of a scheduled commercial bank towards liquid assets. The FDRs deposited by the Clearing Members should be issued in 4

5 favour of Indian Clearing Corporation Ltd. A/c Trade Name of the Clearing Member" and should be duly discharged by the Clearing Member himself or an authorised signatory of the member on the reverse of the FDRs. The FDRs need to be deposited alongwith a covering letter of the Clearing Member in the format given in Annexure - I, and also with a letter from the concerned bank addressed to ICCL in the format given in Annexure - II. Renewal of FDRs Clearing Members may renew the FDRs deposited towards Liquid Assets by submitting a renewal letter from the concerned bank in the prescribed format given in Annexure III. The renewal letter should be submitted along with a covering letter by the Clearing Member in the prescribed format given in Annexure - IV. Bank Guarantee (BGs) Clearing Members can deposit Bank Guarantees (BGs) issued by Scheduled Commercial Banks towards Liquid Assets requirements in the prescribed format given in Annexure - V. The BG may be deposited alongwith a covering letter of the Clearing Member in the format given in Annexure - VI. Clearing Members can deposit bank guarantee(s) with/without the claim period. In cases where bank guarantee(s) are submitted without a claim period, the amount of the bank guarantee(s) would be removed from the liquid assets of the member at least seven days before the expiry date of the bank guarantee(s) or such other period as may be decided by ICCL from time to time. In cases where bank guarantee(s) are submitted with a claim period, the amount of the bank guarantee(s) would be removed on the expiry date of the bank guarantee(s) or such other date as may be decided by ICCL from time to time. Clearing Members are required to ensure the following at the time of deposit of bank guarantees: The bank guarantee should be strictly as per the formats prescribed by the Clearing Corporation. No relevant portion of the bank guarantee should be left blank All irrelevant portions struck off on the printed format should be authenticated by the bank by affixing the bank seal / stamp duly authorised. All handwritten corrections and blanks should be attested by the bank by affixing the bank seal / stamp duly authorized. Each page of the bank guarantee should bear the bank guarantee number, issue date and should be signed by at least two authorised signatories of the bank. That the bank guarantee should be free from any discrepancy before the same is submitted to ICCL. Renewal of BGs Clearing Members may renew the BGs deposited towards Liquid Assets by submitting a renewal letter from the concerned bank in the prescribed format given in 5

6 Annexure VII. The renewal letter should be submitted along with a covering letter by the Clearing Member in the prescribed format given in Annexure - VIII. Eligible securities and units by way of pledge towards Liquid Assets Clearing Members can deposit eligible securities and units in dematerialised form towards liquid assets by way of pledge. The list of eligible securities and units is available on BSE/ICCL web-site. These securities and units shall be pledged in favour of ICCL in the designated depository accounts. The valuation of the securities and units deposited towards Liquid Assets shall be in accordance with the norms and limits as prescribed by ICCL from time to time. The value of the securities shall be subject to such haircut as may be prescribed by ICCL from time to time to arrive at the collateral value of the securities. The valuation of securities and units will be done on a periodic interval by ICCL and benefit to the extent of net value of the securities/units after haircut shall be considered. ICCL may revise the list of approved securities/units and the norms in respect of same from time to time. Clearing Members shall regularly monitor their valuation of securities/units lying towards Liquid Assets and replace/replenish the same based on the revised list of approved securities/units and change in norms. Clearing Members shall also ensure that only eligible securities are pledged and lying towards their Liquid Assets with ICCL and that the said securities are not subject to any lock in period, buy back scheme any charge or lien, encumbrance of any kind, or such other limitations or title is questioned before the court or any regulatory body. Procedure for pledging of demat securities/units towards Liquid Assets Clearing Members need to follow the following procedure for availing the facility to pledge demat securities /units towards Liquid Assets : Clearing Members need to execute a deed of pledge in favour of ICCL, for deposit of approved securities towards liquid assets with ICCL for the concerned segment in the prescribed format given in Annexure - IX. The said deed of pledge should be: signed and stamped on all pages and where manual changes have been carried out by (i) Clearing Member in case of individual, (ii) all partners in case of a Partnership Firm (iii) by any two of the following persons (Managing Director, Whole-time Director, Directors) in case of a company. accompanied with a certified true copy of the Board Resolution, authorising the signatory to sign this deed, to be submitted in case of a company. By Authorized Signatory as approved by the Bank, in case of a Bank. Accompanied with a copy of the authority letter addressed by the member to its Clearing Bank authorising them to carry out the debit in respect of charges levied by ICCL/ICCL s custodian. The said copy of letter shall be duly acknowledged by their Clearing bank. 6

7 A covering letter of the Clearing Member enclosing details of the aforesaid and requesting for opening of a pledgee account of ICCL in whose favour the said demat securities/units towards Liquid Assets of the member shall be pledged. Clearing Members can initiate pledging of securities/units in favour of ICCL for deposit of same towards their Liquid Assets, and requisite benefits in respect of same will be available after receipt of confirmation of the pledge from the Depository system. Government of India Securities towards Liquid Assets Clearing Members may deposit eligible securities of Central Government of India (G-Sec) and Treasury bills (T-bills). The list of such eligible securities is available on BSE/ICCL web-site. The procedure for deposit of eligible securities in form of G-Sec and T-Bills shall be as prescribed in Annexure X 2.4 Procedure for submission of release request of Liquid Assets Clearing Members can place their on-line requests for release of Liquid Assets deposited by them with ICCL to the extent of available collateral which is not utilised/blocked towards margins and/or other obligations of the member through the collateral module provided to them. Such requests may be considered by ICCL, inter alia, subject to availability of un-utilised collateral of the member after due adjustments for the fulfilment of all obligations and liabilities of the member towards ICCL as per the Bye Laws, Rules and Regulations of ICCL or anything done in pursuance thereof. Clearing Members can log-in to the web-based Collateral Module of ICCL and submit their requests for release of available collaterals. No separate letter would be required to be submitted for the same. 2.5 Transfer of collateral from one segment to another segment Clearing Members, who intend to transfer collateral across segments need to send their on-line instruction in respect of same through the Collateral Module. Members can log-in through specific user-ids and passwords into the Collateral Module. Clearing Members can avail facility of on-line transfer of collateral across segments to the extent of the available amount of unutilised collateral (collateral which is not utilised/blocked towards margins and/or other obligations of the member). The transfer requests received from Clearing Members through the Collateral Module shall be treated as request from the member and no separate letter would be required to be submitted. In case of collateral lying in form of bank guarantees issued by banks the same would be available for transfer from one trading segment to another, only after submission of 7

8 letter from the concerned bank regarding transfer of scope of the bank guarantee in the specified format given in Annexure - XI, to ICCL. The evaluation of collateral transfer across the segments will be subject to hair-cut and other criteria/norms in respect of the concerned segments as specified by SEBI/BSE/ICCL in this behalf from time to time. Clearing Members may verify the details of their request for transfer and its status in the Collateral Module. 8

9 3. MARGINS 3.1 Margining Process As stipulated by SEBI vide its various circulars, the core of the risk management system followed in Equity Cash Segment is based on the Liquid Assets deposited by members with the Exchange/Clearing Corporation and is, inter alia, intended to cover mainly the requirements of Base Minimum Capital, VaR Margin, Extreme Loss Margins and Mark to Market (MTM) losses. The liquid assets deposited by members at all points of time should be adequate to cover the aforesaid requirements. The margining process in equity cash segment is based on the categorization of securities traded in the said segment based on its liquidity. The Liquidation criteria of the securities in the said segment is based on the trading frequency and impact cost as detailed below : Liquidity Categorization of Securities The securities traded in the Equity Cash Segment are categorized into three groups viz, Group I, Group II and Group III based on their trading frequency and impact costs as detailed below : Group Trading Frequency Impact Cost Liquid Securities (Group I) At least 80% of the days Less than or equal to 1% Less Liquid Securities (Group II) At least 80% of the days More than 1% Illiquid Securities (Group III) Less than 80% of the days Not Applicable The trading frequency and impact cost are computed on the 15 th of each month on a rolling basis considering the pervious six months trading frequency and impact cost respectively. Based on the trading frequency and impact cost, the securities are moved from one group to another in the next month. In case of securities which have been listed for less than six months, the trading frequency and the impact cost are computed using the entire trading history of the security. In case of newly listed securities, for the first month and till the monthly review as mentioned above, such securities are categories in that group where the market capitalization of the newly listed security exceeds or equals the market capitalization of 80% of the securities in that particular group. Subsequently, after one month the actual trading frequency and impact cost of the security is computed to determine the liquidity categorization of said security. Further, in case of any corporate action declared by the company results in change in ISIN of the said security with new ISIN is treated as a newly listed security for group categorization Computation of Mean Impact Cost The mean impact cost is calculated in the following manner : The impact cost is calculated by taking four snapshots in a day from the order book in the past six months. These snapshots are randomly chosen from with four fixed timing spread through the day. 9

10 The impact cost is the percentage price movement caused by an order size of Rs.1 Lakh from the average of the best bid and offer price in the order book snapshot. The impact cost is calculated for both, the buy and the sell side in each order book snapshot. The methodology for computation of the impact cost adopted is disseminated on the website of the BSE/ICCL. The categorization of securities into various groups for the applicable period is also disseminated on the website of the Exchange. 3.2 Value at Risk (VaR) Margin The VaR (Value at Risk) Margin is a margin intended to cover the largest loss that can be encountered on 99% of the days (99% Value at Risk). For liquid securities, the margin covers one-day losses while for illiquid securities; it covers three-day losses so as to allow the Clearing Corporation to liquidate the position over three days. This leads to a scaling factor of square root of three for illiquid securities. For liquid securities, the VaR margins are based only on the volatility of the security while for other securities, the volatility of the market index is also used in the computation. Computation of the VaR margin requires the following definitions : Scrip sigma means the volatility of the security computed as at the end of the previous trading day. The computation uses the exponentially weighted moving average method applied to daily returns in the same manner as in the derivatives market. Scrip VaR means higher of 7.5% or 3.5 security sigma. Index sigma means the daily volatility of the market index (S&P BSE Sensex or CNX Nifty) computed as at the end of the previous trading day. The computation uses the exponentially weighted moving average method applied to daily returns in the same manner as in the derivatives market. Index VaR means higher of 5% or 3 index sigma. The higher of the Sensex VaR or Nifty VaR is used for this purpose. The VaR Margins for different groups of securities are specified as follows : Liquidity Categorization Liquid Securities (Group I) Less Liquid Securities (Group II) Illiquid Securities (Group III) One-Day VaR Scaling factor for VaR Margin illiquidity Scrip VaR 1.00 Scrip VaR Higher of Scrip VaR and three times Index VaR 1.73 (square root of 3.00) Five times Index VaR 1.73 (square root of 3.00) Higher of 1.73 times Scrip VaR and 5.20 times Index VaR 8.66 times Index 10

11 As stipulated by SEBI, VaR margin rates are applied at beginning of day and also applied intra-day based on the prices at a.m., p.m., 2.00 p.m., and 3.30 p.m. everyday. In addition to the above a VAR rate files are also generated at end of day. 3.3 Extreme Loss Margin (ELM) Extreme Loss Margin (ELM) covers the expected loss in situation that go beyond those envisaged in the 99% Value At Risk (VaR) estimates used in the VaR margin. The Extreme Loss Margin for any security is the higher of 5% or 1.5 times the standard deviation of daily logarithmic returns of the security price in the last six months. The said computation is done at the end of each months by taking the price data on a rolling basis for the past six months and the resulting value is applied for the next month. 3.4 Mark to Market (MTM) margin The MTM margin is computed after trading hours on T day on the basis of closing price of that day. MTM margins are also recomputed in respect of all the pending settlements on the basis of closing prices and the difference due to increase/decrease in MTM margins on account of such recomputation is adjusted in the MTM obligation of the member for the day. The MTM margins are collected on the gross open position of the member. The gross open position for this purpose means the gross of all net positions across all the clients of a member including his proprietary positions. For this purpose, the position of a client are netted across his various securities and the positions of all the clients of a broker are grossed. Further, there is no netting of the positions and setoff against MTM profits across two different settlements. However, for computation of MTM margins for the day MTM profits are set-off against MTM losses at client level. 3.5 Additional margins As a risk containment measure, ICCL may require clearing members to pay additional margins as may be decided from time to time. This would be in addition to the above mentioned margins 3.6 Collection of Margins The VaR margin and ELM are collected/adjusted on an upfront basis from the Liquid Assets of the Clearing Member on an on-line real time basis. The said margins are collected on the gross open position of the member. The gross open position for this purpose means the gross of all net positions across all the clients of a member including its proprietary position. For this purpose, there is no netting of positions across different settlements. Example of member s gross open position for the purpose of VaR & ELM margins is given in Annexure XII. The MTM margin is collected from the members first by adjusting the same from the available cash and cash equivalent component of the liquid assets and the balance MTM is collected in form of cash from the members through their clearing banks before the start of the trading of the next day. Methodology for computation of MTM Margin is given in Annexure XIII. 11

12 In case of institutional transactions the aforesaid margins (VaR, ELM and MTM) are collected on T+1 day, subsequent to confirmation of the transactions by the custodians. The margins are levied on the custodial clearing members in respect of those institutional transactions confirmed by them. In respect of the institutional transactions rejected/not confirmed by the custodians the margins on same are levied on the concerned member who has done the transaction. For the purpose of aforesaid, institutional investors, inter alia shall include : FIIs/FPIs registered with SEBI. Mutual Funds registered with SEBI. Public Financial Institutions as defined under Section 4A of the Companies Act, Banks, i.e., a banking company as defined under Section 5(1)(c) of the Banking Regulations Act, Insurance companies registered with IRDA. Any other entity as may be specified by SEBI from time to time. 3.7 Exemption from margins The exemption from margins are given in cases where early pay-in of securities and funds is made, the outstanding position to the extent of early pay-in are not considered for margin purposes. Clearing Members have the facility to do pre-trade/post-trade early pay-in of securities and funds trade. For availing the aforesaid facility Clearing Members are required to follow the early pay-in procedure as specified in Annexure XIV which also include the necessary file formats. 3.8 Release of blocked margins The margins are released on completion of pay-in of the respective settlement. 3.9 Margin Shortfall Clearing Members shall maintain adequate liquid assets with ICCL at all point of time to cover their margin requirements. In case de-activation of trading terminal during trading session in the Equity Cash Segment on account of margin shortfall, the same shall attract fines / penalties or such disciplinary action as may be specified from time to time. The present norms for imposing fines/penalties on Clearing Members in case of de-activation of trading terminals during trading session in the Equity Cash Segment is enclosed as Annexure - XV Maintenance of Capital Cushion For the purpose of monitoring those members having high collateral utilisation, the following methodology or such other methodology as may be specified by the relevant authority from time to time is adopted to encourage members to hold capital cushions: 12

13 At the end of each calendar month, Clearing members who have exceeded 90% of utilization of capital/limits during the day for more than 7 days in the current month are identified. In Equity Cash segment, the utilisation is monitored after considering VaR margin, ELM, Additional Margins (if any) and MTM margin. The capital requirement to bring the utilisation to a level of 85% at the time of violating the trigger point of 90% on each of those occassions are noted for the members. The highest of such amounts for the identified members during the month is collected as additional capital. The requirement is communicated to Clearing Members on the first day of the subsequent month. The Clearing Members is provided a time limit of three working days to provide the amount of additional capital in the form of Cash, FDRs and Bank Guarantees only. The additional capital so collected is retained with ICCL for a period of one calendar month. No benefit including exposure, margin etc. is available to the Clearing Member on the amount of additional capital so collected. In case of non- payment of additional capital within the stipulated time limit a penalty as applicable for funds shortage is levied for the period of default. In case a Clearing Member is liable to provide additional capital in the subsequent month, the amount of additional capital is recomputed and the excess /deficit is refunded /called for Cross Margining As per SEBI Circular Ref No: SEBI/DNPD/Cir- 44 /2008 dated December 02, 2008 on the cross margining benefit across Exchange traded Equity (Cash) and Exchange traded Equity Derivatives (Derivatives) segments is available to members. The salient features of the cross margining facility are detailed below : Positions eligible for cross-margin benefit The positions of clients in both the cash and derivatives segments to the extent they offset each other are considered for the purpose of cross margining as per the following priority: 1. Index futures position and constituent stock futures position in derivatives segment 2. Index futures position in derivatives segment and constituent stock position in cash segment 3. Stock futures position in derivatives segment and the position in the corresponding underlying in cash segment A basket of positions in index constituent stock/stock futures, which is a complete replica of the index in the ratio specified by the Exchange/Clearing Corporation, is 13

14 eligible for cross margining benefit. The number of units is changed only in case of change in share capital of the constituent stock due to corporate action or issue of additional share capital or change in the constituents of the index. The positions in the derivatives segment for the stock futures and index futures should be in the same expiry month to be eligible for cross margining benefit Computation of cross margin A spread margin of 25% of the total applicable margin on the eligible offsetting positions, as mentioned above, is levied in the respective cash and derivative segments. Cross margining benefit is computed at client level on an online real time basis and provided to the trading member / clearing member / custodian, as the case may be. The positions in the Equity Cash segment and Derivatives segment is considered for cross margining only till time the margins are levied on such positions. While reckoning the offsetting positions in the Equity Cash segment, positions in respect of which margin benefit has been given on account of early pay-in of securities or funds is not be considered. 14

15 4. CLEARING & SETTLEMENT Trades done by the members in the Equity Cash Segment of BSE Ltd. are cleared and settled through Indian Clearing Corporation Ltd. (ICCL) as per the norms/guidelines issued by Securities and Exchange Board of India (SEBI) and as per the provisions of Rules, Bye-Laws and Regulations of ICCL and BSE as well as any other norms/circulars/guidelines which may be issued by BSE/ICCL in respect of the same from time to time. The members need to participate in the settlement process as per the guidelines and settlement schedule prescribed by ICCL from time to time for settlement of trades. Facility is also available for Custodial Participants to settle their trades through Custodian Members of ICCL. For this purpose, the members need to give-up the trades to the Custodian Members for confirmation within such time and through such facility as may be provided from time to time by ICCL. 4.1 Settlement Schedule The Settlement Schedule for Equity Cash Segment is as under: The trading and settlement periods are specified by the relevant authority from time to time. The pay-in and pay-out of securities and funds pertaining to trades done in various groups of securities in the Equity Cash Segment on BSE are to be effected in accordance with the settlement schedule issued by ICCL periodically. Clearing Members should maintain clear balance of securities in their respective depository accounts and funds in their settlement accounts with the their respective designated Clearing Banks towards their settlement pay-in obligation at the scheduled pay-in time on the settlement day. In case of transactions in securities to be cleared in physical form the Clearing Members should deposit the required securities towards their settlement pay-in obligation with ICCL at the scheduled pay-in time on the settlement day. The pay-out of demat securities are credited to the respective designated depository accounts or directly credited to the respective client s demat accounts as specified by Clearing Members to ICCL and the funds pay-out are credited to the receiving Clearing Member s settlement account maintained with their designated Clearing Bank. In case of pay-out of securities in physical form, the members should collect such pay-out securities from ICCL before the stipulated time on the scheduled settlement day. 4.2 Settlement Process Trades done in the securities under various groups in the Equity Cash Segment on BSE are settled through ICCL on a T+2 basis i.e. the settlement of transactions done on T day i.e., trade day takes place on second business day (excluding Saturdays, Sundays and bank holidays) after the trade day. The settlement calendar, providing the settlement schedule of the various settlement 15

16 related activities, is drawn by ICCL in advance and circulated among the market participants. The settlement of trades done in the Equity Cash Segment is settled either on nettingoff basis (i.e. netting of buy and sell positions of a member-broker in the same scrip and same settlement) or on trade to trade basis (i.e. on gross basis - no netting of buy and sell positions) depending on the applicable norms/categorisation of the securities as decided by BSE /ICCL from time to time. The funds obligations for the members are netted for transactions across all groups of securities. The following table summarises the trading and settlement cycle for scrips in Equity Cash Segment : Day T Activity Trade Day. 6A/7A (give-up/take-up)* entry by the member-brokers/confirmation by the custodians. Daily downloading of statements showing details of transactions and margins at the end of each trading day. Downloading of provisional securities and funds obligation statements to members. Confirmation of 6A (give-up) data by Custodians. T+1 Downloading of final securities and funds obligation statements to members. Pay-in of funds and securities T+2 T+3 Pay-out of funds and securities. Auction session. Auction - pay-in and pay-out of funds and securities). 4.3 Securities pay-in and pay-out process The pay-in and pay-out of settlement obligations for securities in equity cash segment is to be done by members in demat mode or physical mode depending on the type/group of securities (i.e. compulsory demat, optional demat or physical mode) in which the member has traded. The pay-in and pay-out process in the demat mode and 16

17 physical mode is as under : Securities pay-in in demat mode Clearing Members can effect pay-in of demat securities to ICCL through either of the Depositories i.e. Central Depository Services India Ltd. (CDSL) or National Securities Depository Ltd. (NSDL). Clearing Members are required to give instructions to their respective Depository Participants (DPs) specifying details viz, settlement no., effective pay-in date, quantity, etc. for effecting pay-in of the demat securities to ICCL by the stipulated time on the scheduled settlement day Auto delivery facility for pay-in of demat securities Members can avail the auto delivery facility for pay-in of demat securities whereby delivery instructions to the concerned depositories are automatically generated on behalf of the Clearing Members for transfer of demat securities from their Pool account/principal account maintained with the depositories. The auto delivery facility is available for Normal, Trade for Trade and Auction settlements Pay-in of securities in physical mode In case of delivery of securities in physical mode, the Clearing Members are required to deliver the securities to ICCL in special closed pouches along with a soft copy of file (in prescribed format) containing the relevant details viz, settlement no. distinctive numbers, scrip code, quantity, etc., of such physical securities obligation. A hard copy of the details of securities pay-in is also required to be submitted by the Clearing Member alongwith the physical securities Securities pay-in shortages In case of shortfall/failure by the members to deliver securities to ICCL in a settlement, the same are auctioned (in case of securities which are traded/settled on netting-off basis as aforesaid) or directly closed-out (in case of securities which are traded/settled on trade to trade - gross basis as aforesaid) as may be specified by ICCL from time to time. On scheduled pay-in/pay-out day of respective settlement, a statement of securities short delivered/received is provided to Clearing Members. The value of un-delivered securities is recovered from the Clearing Members through their Clearing Banks Auction and Close-out of securities settlement shortages The auction / close-out are conducted as per the auction/ close-out schedule declared from time to time. Currently auctions are conducted on T+2 day. Auction Settlement is done on T+3 day. The selling members who have failed to deliver securities in particular settlement are not allowed to offer the same securities in the auction pertaining to that settlement. In case of pay-in/pay-out of multiple settlements are scheduled on same day, then the auction in respect of first settlement is conducted on the same day and the auction in respect of second settlement is conducted on the next trading day. In cases where a particular scrip could not be bough-in the auction or in 17

18 case where members fail to deliver securities offered in auction then the same are closed out Securities Pay-out in demat and physical mode After completion of the settlement pay-in process by ICCL, the pay-out of demat securities are credited by ICCL to the depository Pool / Principal Accounts of the Clearing Members. In case of pay-out of demat securities to Clearing Members, ICCL has provided facilities to members for (a) direct pay-out of demat securities to clients demat accounts and (b) pay-out of securities in pool account of the concerned member with selected Depository Direct pay-out of demat securities to clients beneficiary account ICCL has provided a facility of direct pay-out of demat securities to clients demat accounts, whereby pay-out of demat securities of the members are directly released to their respective clients demat beneficiary accounts. For availing the said facility of direct pay-out of demat securities to the clients beneficiary account, the concerned members are required to upload the settlement-wise client - wise break-up file to ICCL. Based on the details provided in the said uploaded file by the members to ICCL, the pay-out of demat securities is released to the demat accounts of the respective clients of the members Pay-out of securities in member s pool account with selected Depository ICCL has provided a facility to Clearing Members to receive their demat securities pay-out in their pool account with selected depository. Accordingly, Clearing Members can receive pay-out of demat securities in their specified pool account in either of the depositories, viz, NSDL or CDSL. In case of pay-out of securities in physical mode, the receiving members are required to collect the same from ICCL as per the time schedule on the pay-out day. 4.4 Funds pay-in and pay-out process The pay-in and pay-out of funds in equity segment is done through banks designated as Clearing Banks by ICCL. The list of Clearing Banks currently available for settlement is provided in Annexure XVI. Clearing Members of Equity Cash Segment need to maintain and operate a separate settlement account with any one of the designated Clearing Banks. The said settlement account shall be exclusively used for clearing & settlement operations viz, for settlement of funds obligation, payment of margins, obligations to ICCL, fines, penalty charges, etc., or as may be specified by ICCL from time to time. Format of letter to be submitted by the member to the clearing bank for the above purpose is enclosed as Annexure XVII. 18

19 4.4.1 Funds pay-in shortages In case of non-fulfillment of funds pay-in obligations pertaining to normal pay-in, securities shortages pay-in, auction pay-in and for failure to deposit additional capital towards capital cushion requirements as per SEBI norms within stipulated time to ICCL, the same are treated as violations and/ or non-performance of obligations and attract late fees / fines / penalties or such disciplinary action as may be specified from time to time. The present norms for imposing late fees/fines/penalties on member brokers, inter alia, for non-fulfilment of funds obligations in the Equity Cash Segment is enclosed as Annexure XVIII. 4.5 Physical securities settlement objections Clearing Members are required to check the physical securities received in pay-out for good delivery as per the norms of good and bad delivery of documents prescribed by SEBI/BSE/ICCL while collecting the same from ICCL. In case, the documents received in pay-out are not considered good delivery, the receiving Clearing Member should participate in "Settlement-wise Objection Cycle" as per the schedule published by ICCL from time to time. The following table summarises the settlement objection cycle followed by ICCL in respect of securities received in physical mode in the settlement for Equity Cash Segment : Patawat arbitration session : Receiving member to obtain Arbitration award from official of the Bad Delivery Cell of ICCL. T+3 day Receiving member to submit the securities received under objection to ICCL. Delivering member to collect such securities under objection from ICCL. Delivering member may obtain Arbitration awards for invalid objection from members of the Arbitration Review Committee. T+4 day T+5 day Delivering member to submit rectified securities, confirmation forms and invalid objections to ICCL. Receiving Member to collect the rectified securities from ICCL. Receiving member to obtain arbitration awards for invalid rectifications (documents not rectified as per the specified norms) from official of the Bad Delivery Cell of ICCL and deposit such securities (invalid rectifications) back to ICCL. Delivering member to collect the said securities returned by Receiving member from ICCL. 19

20 The securities not rectified by the delivering members as per the specified norms as per the scheduled time table are returned back to the delivering member and the transaction is directly closed-out as per the procedure. A Rs.100 per Delivery Order is debited by ICCL on the delivering member for delivering shares, which are not in order. 4.6 Company Objections Company objections are the bad deliveries arising out of rejection of physical securities and/or documents (pertaining to securities) sent to the companies by the buyers for getting them transferred in their names. Clearing Members have been provided the facility for resolving such company objections through ICCL as per the BDC settlement schedule declared by it from time to time and based on the norms for /Bad Deliveries formulated by SEBI/BSE/ICCL. ICCL follows a weekly BDC settlement schedule for acceptance of Objections and Rectifications. Each BDC settlement schedule follows a 21 day cycle, commencing every Tuesday of the week. The physical documents alongwith the soft copy details of company objections are required to be submitted to ICCL by buyer Clearing Members in the settlement cycle commencing every Tuesday of the week. ICCL shall accept the bad delivery documents only if the soft copy details pertaining to such company objection have been successfully uploaded in its BDC system. The introducing member is required to rectify the said company objections and submit the same back to ICCL within the 21 day settlement schedule, failing which auction/close-out would be carried out as per procedure Valuation Price for Bad Delivery The valuation price for securities which constitute bad deliveries, shall be the closing price of such securities, on the trading day preceding the settlement day unless prescribed otherwise from time to time by the relevant authority. For the purpose of this clause, the closing price shall be the price as announced by the Stock Exchange and the day of valuation shall be the day as decided by the Clearing Corporation from time to time Valuation Price for failure to deliver The valuation price for securities which were not delivered on the settlement day for securities, shall be the closing price of such securities, on the immediate trading day preceding the pay-in day for the securities unless prescribed otherwise from time to time by the relevant authority. For the purpose of this clause, the closing price shall be the price as announced by the Stock Exchange and the day of valuation shall be the day as decided by the Clearing Corporation from time to time. 4.7 Clearing Bank Every Clearing Member shall maintain and operate a distinct settlement account for the Equity Cash Segment with any one of the designated Clearing Banks. The 20

21 settlement account shall be used exclusively for clearing & settlement operations i.e., for settling funds obligations, payment of margins, fines, penalty charges, etc. as may be specified by ICCL from time to time Operation of settlement Account Clearing Members shall irrevocably authorise their designated clearing banks to access their settlement accounts for debiting and crediting their settlement accounts as per the instructions of ICCL, reporting of balances and other information as may be required by ICCL from time to time. Clearing Members shall maintain clear balance of funds in their settlement accounts with their designated clearing banks towards their funds obligations to ICCL. Clearing Members shall not seek to close or de-activate the settlement accounts without the prior written consent of ICCL. The Clearing Banks shall debit/credit the settlement accounts of Clearing Members as per instructions received by them from ICCL from time to time. Any request from the Clearing Members for revoking the authorisation furnished by them shall not be considered by the Clearing Banks. The Clearing Banks shall not close the settlement accounts or permit deactivation of the same without the prior written consent of ICCL Procedure for change in designated Clearing Bank : In case a Clearing Member wishes to shift their settlement account from one designated Clearing Bank to another, the following procedure shall be followed : 1. The Clearing Member shall submit their request letter (on their letterhead) to ICCL regarding their intent to shift their settlement account from one designated Clearing Bank to another, as per the format enclosed as Annexure XIX. 2. On completion of the necessary formalities, ICCL will inform the member in writing about the date from which they can start their clearing and settlement operations from new designated Clearing Bank. However, till such time, ICCL will continue to debit /credit the member s existing clearing bank account as aforesaid. 21

22 5. GUIDELINES FOR GOOD/BAD DELIVERY /Bad Delivery Norms Transfer Deeds No. Description /Bad 1. Transfer Deeds in the prescribed form and printed with the words "For the Stock Exchange." Stock Exchange emblem may or may not be printed. Month and year of printing may or may not be put on the reverse of the Transfer Deed. 2. Mutilated Transfer Deed with the signatures of the transferor, Bad witness, Directors and officer of the Company/ distinctive numbers/any material portion badly torn overwritten, or defaced Typical Cases: A) Material portion defined here only pertains to the material portions at the time of delivery and not prospective one. For a buyer Consideration column, Specimen signature column, Name, Address, Occupation will also be the Material portion. Material portion includes of transferor's name and signature, company name, folio no., certificate number, distinctive nos., number of shares, name and signature of the transferee, specimen signature of transferee B) Transfer Deed torn in the prospective material portion Torn and pasted with self-adhesive tape on which the required Details can be filled in without any difficulty. Transfer Deed torn in non material portion and held together by a transparent tape 22. Transfer Deed torn end-to-end in any angle. Bad 3. Transfer Deeds with correction like erasure, overwriting, alteration or crossing out in the material portion Under noted corrections / alterations are not considered as correction in material portion : A) Minor spelling mistake in the following fields are valid without the transferor's authentication provided the word can be properly identified : a. Name of the Company. b. Number of shares in words if properly authenticated under the full signatures of all the transferor

23 c. Names of the Shareholders Illustration Bad Telco Teelco Tisco Fifty Feefty Feefteen Ramesh Rameesh Rajesh B) Erasure, overwriting, alteration or crossing out in one or two characters in folio numbers. C) Erasure, overwriting, alteration or crossing out in one or two characters of ' Distinctive Numbers.' D) Erasure, overwriting, alteration or crossing out in one or two characters of ' Certificate Number '. E) Erasure, overwriting, alteration or crossing out in Number of Shares in figures F) Erasure, overwriting, alteration or crossing out in one or two characters in Number of shares in Words. G) List of certificates numbers and distinctive numbers and distinctive numbers attached to transfer deed signed by all the transferors 4. If the name of the transferor (s) in the share certificate & the name in the transfer deed(s) differs materially. if certificate number does contain any erasure, overwriting alteration, or crossing out. if distinctive number does not contain many erasure, over writing, alteration, or crossing out if Number in words does not contain any erasure, overwriting, alteration, or crossing out if Number of Shares in Figures does not contain any erasure, overwriting, alteration, Bad A) Addition or Deletion of 1 or 2 alphabets. B) Krishna Chandra Chelura - C C Krishna Bad C) Ashok Gupta - Gupta Ashok D) Corporation - Corpn/Corp. 23

24 5. Transfer Deeds signed as 'Choonilal' whereas in share certificate the name is spelt as 'Chunilal'. Other than any apparent difference in seller's signature must be accepted. In case of apparent difference like S Rao signing as David. In case S Rao signing as Subhash since the first letter of the signature matches with the initial. 6. Transferor's signature in English, Hindi or any one of the Scheduled languages in India.Assamese, Bengali, Gujarati,Hindi, Kannada, Kashmiri, Malayalam, Marathi, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu - as per Constitution of India - English Schedule ( Articles 314 (I) and 451). 7. Signature of the Transferor is in an Indian language other than the Scheduled languages of India or when the Transferor has affixed his thumb impression. If attested by any person authorised to attest signatures under the Seal/Stamp off his office 8. Transfer Deeds in respect of joint holdings signed by all the joint holders in any order. Provided the signatures are against the relative names filled up in the Transfer Deed. 9. Transfer Deeds without the name of the Company, name(s) of Transferor(s), Folio No., share certificate no., Distinctive no., and number of shares being written. 10. In one lot with one Transfer Deed name on one certificate reading as "Ramesh C Talati" and on another certificate as "Ramesh Chunilal Talati" but Register Folios same on both. In one lot, separate transfer deeds are required for each registered folio. If the transferor's name is identical and folios are different and there is only one transfer deed. 11. In one lot with one Transfer Deed names on different certificates reading as Ramesh Chunilal Talati and Talati Ramesh Chunilal but Register Folio is same. 12. Income Tax Authority or Collector signs as Transferor. (Number and Date of the relative Order necessary). 13. Instead of Executor's signature, his Agent's signature is put on the Transfer Deed. (Number and Date of Registration of Power of Attorney necessary). 14. Executor's signature without his rubber stamp.(number and Date of Registration of Power of Attorney necessary). 15. In the case of Units transfer deed in the name of a Minor and signed by natural Guardian. (In the case of Court Guardian, a court order is required). Shares cannot be held in the name of a Minor unless accompanied by Court Order granting permission for sales/purchase which is beneficial to the Minor. Bad Bad If accompanied by the 24

25 16. Unless the transfer deed is duly certified and countersigned by the Official Assignee. 17. Transfer deeds signed under Power of Attorney where the power given is subject to conditions Transfer deed signed by Director of the Company and Under Board Resolution not mentioned on the front or the reverse of the transfer deed. ( Stamp of Introducing member is not required to be affixed on the reverse of the transfer deed) Transfer deed signed by an authorised signatory Transfer deed signed by an authorised signatory of a custodian and the PA registration no. is mentioned on face or the reverse of the transfer deed. (Stamp of Introducing member is not required to be affixed on the reverse of the transfer deed) Where the transfer deeds are signed by an authorised signatory under a Board Resolution and the stamp UNDER BOARD RESOLUTION is mentioned on the face or the reverse of the transfer deed. (Stamp of introducing member is not required to be affixed on the reverse of the transfer deed) 18. Transfer Deed signed by a custodian on behalf of a client In the signature column the custodian does not put the stamp as 'Constituted Attorney' on behalf of the transferor Transfer Deed signed by a Custodian on behalf of the client and in the signature column puts the stamp ' By Constituted Attorney to the transferor ' with the P/A number given on the face or reverse of the TD with the stamp and signature of the custodian. (Stamp of introducing member is not required to be affixed on the reverse of the transfer deed ) 19. Shares sold by FIIs and transfer deed signed by a Custodian on behalf of the FII.(Copy of RBI approval is not required to be attached ) 20. In case of GDR Photocopies of the RBI approval attached to the deliveries ; OR If RBI approval number and date is mentioned on the transfer deed and attested by the introducing member 25 relevant Court Order for sale. Bad only if PA stamp of the introducing Member is mentioned on the reverse of the Transfer Deed. Bad 21. Consideration amount and date of execution of the transfer Bad

26 deeds are filled in. 22. Transfer Deeds signed by or on behalf of a Company against which liquidation proceedings are pending. Unless the Transfer Deed is certified and countersigned by the Liquidators. 23. The name of the delivering broker with his SEBI Registration number and date not mentioned at the back of the Transfer Deed. In case the shares are delivered to the Clearing House by the Custodian and the Transfer deed bears the stamp of Custodian along with the Clearing Number of the Broker on whose behalf the shares are delivered. The date should be the pay-in date/ delivery date only. 24. Shares held by a TRUST and Signed on the Transfer Deed as 'NAME OF TRUST - PROPRIETOR'. TD signed as "NAME OF TRUST - TRUSTEE" Shares held in the name of a trust, if accompanied by a copy of the resolution or the relevant portion of the trust deed authorising the trustees to transact in securities on behalf of the trust. 25. If shares held are duly registered by the company in the name of the HUF (Shares held by HUF and signed by KARTA) 26. Transferor's signature witnessed by a person but his full name not given. as long as the name and address of the witness are perfectly legible. 27. Witness name, address and signature is in a language other than English specified by the Ministry of Finance. Assamese, Bengali, Gujarati, Hindi, Kannada, Kashmiri, Malayalam, Marathi, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu - as per Constitution of India - English Schedule ( Articles 314 (I) and 451). If signed in a language other than specified by the Ministry of Finance. 28. Attestation stamp in any one of the Scheduled languages in India. Indian languages: Assamese, Bengali, Gujarati, Hindi, Kannada, Kashmiri, Malayalam, Marathi, Oriya, Punjabi, Sanskrit, Tamil, Telugu and Urdu - as per Constitution of India - English Schedule (Articles 314 (I) and 451). 29. Transferor's signature attested by a Bank official only the designation mentioned. If the name, Designation of the attesting authority signing along with the complete address is given. 30. Attestation by Gram Panchayat or a Surpanch or Village Magistrate or Village Munsiff under his seal. 31. Signature attested by any person authorised to attest signatures with his full name and address with the Official Seal/Stamp of his office. Bad Bad Bad Bad Bad Bad 32. Transferor's signature is attested by a Notary Public.(The 26

27 necessary seal, rubber stamp, adhesive stamps as prescribed for such attestation should be affixed in cases where Notary attestation is required i.e. In cases where Rectification of objections is required due to signature differences). 33. Transfer Deed is signed by the transferor Signature is clearly of a name different than the name of the transferor. If signature is same for two different shareholders under two different Transfer Deeds. 34. Marketable lot with more than five transfer deeds. Upto five transfer deeds used to make a marketable lot. 35. New shares which are issued on prorata basis and old shares standing in the folio and name of same transferor and accompanied by one transfer deed for a marketable lot. (The new share dividend declared for the previous year i.e. the old new compensatory value (ONCV) would be payable on the entire market lot). 36. Company's name has been changed but it has not been corrected on the share certificate. 37. Abbreviated name of a Company filled up in the transfer deed.if from the abbreviated name the identity of the company can be ascertained. The name of the Company should be identifiable., e.g. TELCO, TISCO, L&T, etc. 38. Exact position of TDs to be attached on top of the certificate.td should be placed on the top of the share certificate. Bad Bad Bad 39. Transferor and witness is the same. Bad 40. Transfer Deeds in the prescribed form and name of a particular Stock Exchange filled in or not. 41. Transfer Deed not in the prescribed form. Bad 42. Witness and attesting authority identical. 43. Transfer Deeds bearing signatures of witnesses, the address of the witness being in a different city or town or Centre other than that of Transferor or Transferee. 44. Prescribed Authority (ROC) seal overlapping and stamped twice.even if the signature of the Registrar of Companies is partly printed and the date stamp is also partly printed but both the signature and the date should be apparent 45. The Endorsement of the Prescribed Authority (e.g. Registrar of Companies) bears the same date as the date from which the Register of Members of the Company is closed 46. If the Endorsement of the Prescribed Authority (e.g. Registrar of Companies) bears a date prior to the date of issue of share certificate or the date of allotment of shares. Provided the Endorsement of the Prescribed Authority bears a date of or after the date from which the Register of Members of the Company closed last. 47. Transfer Deed endorsed by the Prescribed Authority on a date prior to closure of the Register of Members of the Company Bad 27

28 delivered after the date of closure of Register of Members. 48. Transfer Deeds accompanying debenture certificates or any other permissible listed security (other than equity) whether date-stamped by the Prescribed Authority or not. Provided for the convertible portion a separate date-stamped Transfer Deed is delivered. 49. Transferor's signature on the transfer deed with the date on which he has signed. 50. Witness is a Non-Resident and the address given is of a foreign country. 51. Distinctive numbers range "To" partly filled in the transfer deed. e.g etc. 52. In the case of mutual funds, the ROC stamp and signature are missing (except in case of Schemes of Unit Trust of India). 53. Certificates with multiple folios per market lot attached to separate transfer deed (subject to guideline no. 35 above). 54. Logo of the Stock Exchange on the reverse of the transfer deed missing. 55. Attestation of the transferor's signatures is not mandatory. except in the case where the transfer has been returned by the company due to SIGNATURE DIFFERENCE. 56. Units issued with the terms 'either or survivor', if signed by all holders, If signed by any one of the holders 57. Transferor's signature on the transfer deed is facsimile signature for Registered custodians. 58. Certified Transfer Deed Provided the name and address of the Transferor the distinctive numbers of the shares covered by the Transfer Deed and date of certification are given. 59. Any erasure or alteration in the Certified Transfer Deed. When authenticated by an authorised signatory of the Company. 60. Certified Transfer Deeds and share certificates delivered in part for bargains in market trading unit. 61. In case of shares under lock in-period, if the transfer deed date is prior to the lock-in period last date but the date of introduction into the market is after the last date of lock-in period. If the transfer deed date is prior to the lock-in period last date and the date of introduction into the market is before the last date of lock-in period 62. Some companies allot record numbers for shares issued by them apart from distinctive number ranges. For these shares, if record number is filled up along with distinctive number ranges on the transfer deed. Bad 62 A. If only the record number has been filled up instead of Bad distinctive number ranges on the transfer deed. 62 B. Transfer deeds ( dated June 01, 1997 and thereafter ) bearing Bad 28

29 rubber stamps on the reverse thereof other than those of members of the stock exchanges/clearing house/clearing corporations, SEBI registered sub-brokers and Remisiers registered with the stock exchanges Share Certificates No. Description /Bad 63. Name of the company or emblem is not readable on the common seal or there is no common seal on the share certificate. 64. The last date for payment of call has expired and the call has not been paid or if the call has been paid, the necessary Call Receipt has not been attached. Bad The call payment receipt with the stamp of the Bank before or on the due date if attached to the securities good delivery for three months from the last date of call payment or next book closure announced by the company whichever is later. All call payment receipts after due date must be endorsed as ' cheque / draft realised ' by the Bank / Co / Registrars. Where the closure of the register of members fall within the period of 3 months from the due for payment of call money, call money receipt valid until the closure of Register of Members occurring after the first such closure 65. All securities with stickers issued by the companies in lieu of endorsement 66. If call money paid but not endorsed on share certificate even after the book closure but transfers affected after the call payment date. 67. If the final call is endorsed but the initial or the initial and the second call not endorsed. ( i.e. if marked "FULLY PAID" ) 68. In case of fully convertible debentures, after the debentures have been converted into equity, if the call money endorsement has been done only for the equity portion and not for the debenture portion or vice versa. 69. Call paid endorsements made by the company with call amount and signature of the Authorized Signatory with or without the Rubber stamp of the Company and date of payment of the call. 70. In the case of partly paid shares, when a call has been made but not paid and delivery effected during the period of ten days before the last date fixed for payment. If the call receipts are attached to the documents 71. Application Receipts and Call money receipts not bearing bank stamps and payment details. 72. Any significant correction, erasure, overwriting, crossing out or alteration in the quantity of the shares, in the last registered Bad Bad Bad Bad 29

30 holders name or in any material particulars on the share certificate. Unless the Authorised Signatory who has signed on the certificate, authenticates the correction Or the correction is initialed and authenticated by any other officer under the Company's rubber stamp. 73. Certificates badly torn as is not to be in a deliverable condition or share certificate torn through and through or badly torn as to obliterate or render illegible or create the impression of cancelling the numbers or directors or other signature or the date or any other particulars or if it is written upon or damaged or mutilated by advertisements, printing, rubber stamp or otherwise or if a material part of the Bad certificate be torn out or cut off. 74. Share certificates defaced or mutilated in portion: Bad The following will be considered as material portion in the case of share certificate: (i) Share certificate torn end to end and pasted with transparent self-adhesive tape (ii) Where shares have been transferred to a new holder and if torn at the original holders name portion (iii) Folio number and name overwritten in one or two characters and not authenticated by the authorised signatory (iv) If the share certificate is torn at the company name portion but is decipherable (v) Corrections in transfer Number or Date of transfers, if legible and not authenticated. vi) Share Certificates with bar codes not concealing any material information. 75. If the name of the Company has been disfigured in the body of the share certificate so as to affect it materially. If the name of the company is identifiable. 76. Certificates in the case of UNITS discharged by the transferor for purpose of repurchase and then cancelled by him and initialed. 77. Share certificate contains one name but the transfer deed consists of two signatures. If both the signatures on the transfer deed are identical in nature or can be identified as signature of the same person. If the transferor has signed twice but has struck off the 2nd signature 78. Share certificate contains name of one transferor but transfer deed contains two names and signatures respectively. 79. Preferential/promoters quota shares under lock-in period delivered which are not transferable. 80. Share certificate issued without the signature of Secretary/ Authorised signatory. If the shares are transferred subsequently and the authorised signatory has signed against such transfer. Bad Bad Bad Bad Bad Bad Bad 30

31 81. Signature missing in the initial column but signed by Authorised signatory in the required column on the reverse of the certificate. 82. Endorsement effected on the reverse of the certificate and struck off and again endorsed. 83. Certificate with company's old registered office crossed out and new address stamped without authentication. 84. Certificate without mentioning the place of issue. 85. Revenue stamp affixed on the certificate concealing any material portion of the certificate. Provided any material portion like locking period date, NRI details are not affected 86. Revenue stamps affixed/impressed by the Company on the share certificate has come off. 87. Any alteration or erasure or correction without initials in the transfer endorsement on the back of the share certificate as for example made in the year 1960 and subsequently the shares have again been transferred by the Company, say in Share certificates with irrelevant or extraneous rubber stamp or writings on the scrip. Provided the rubber stamp or the writings does not affect any material portion of the scrip. Subject to proper authentication by the Company by putting a round stamp of the Company. 89. Increase or decrease of the Capital and if the certificate does not carry the endorsement on the face of the certificate. 90. Absence of holder's discharge on the Letter of Allotment. 91. Share Certificate and Transfer Deed not attached together. Bad 92. Shares standing in the name of Non-Resident Individuals. Provided the declaration stamp as per the RBI guideline is affixed and countersigned by the introducing member 93. Name of the holder printed in two lines which looks like joint holding or one line of address printed and looking like second holder. 94. Lock in period mentioned in the certificate, without specific date of release of lock in. 95. Shares issued in the name of Sole Proprietor/ Partnership firm signed by the Proprietor/Partner. Units/debentures issued in the name of Sole Proprietor/ partnership firm signed by the Proprietor/partner 96. In case the shares of a company are not pari passu with the existing equity shares of the company in two financial years then new share dividend declared for the previous year i.e. Bad Bad 31

32 the old new compensatory value(oncv) for two years has to be paid. The full dividend declared will have to be paid (interim + final) Miscellaneous No. Description 97. Validity period of Company Objection by the last buying broker to be notified to the exchange/introducing broker is 12 months from the date of the objection memo. 98. Objections must be accompanied with Share Certificates. 99. Shares lodged for transfer after book closure (but before one year from the date of stamping the transfer deed) are returned under objection can be lodged as company objection Where the shares have been duly transferred by the company in the name of the transferee, and thereafter the company sends a letter informing transferee that the shares have been transferred based on fraudulent documents, such cases can be lodged as company objection subject to the following conditions and procedure : In cases where the company has transferred certificates which are fake and later sends a letter informing that the shares have been transferred on fraudulent certificates, such cases will NOT be treated as company objections and company will be responsible for the transfer. In cases where the shares are under stop transfer, stay order, non transferable ( lock - in period ) or shares are partly paid and the company has transferred the shares and later sends a letter informing that the shares have been transferred on fraudulent documents, such cases will NOT be treated as company objections and the company will be responsible for the transfer. In cases where the certificates are genuine but the transfer deed is forged (i.e. the company has transferred the shares in good faith ) the shares can be accepted as company objection. In such cases the company should necessarily enclose the copies of both sides of the transfer deeds based on which shares were transferred by the company in favour of the holder and which later on has been found to be based on forged documents, and all subsequent transfers thereafter alongwith the objection. Procedure : ( In order to simplify the understanding of the procedure, the following illustration has been used : A-- > B -- > C -- > D -- > X -- > Y -- > Z The shares were first sold through 'A' in the market. After passing through 'B' and 'C' the shares were lodged by 'D' to the company for transfer. After receiving the shares duly transferred from the company in his name 'D' sold the shares in the market. These shares after passing through ' X' and 'Y' are finally sent by 'Z' to the company for transfer in his / her name. After receiving the shares from the company duly transferred in his name, 'Z' has 32

33 received a letter from the company stating that the shares transferred in the name of 'D' were based on fraudulent documents. 'Z' will report the objection along with the company objection against 'D' 'D' will rectify /replace the shares within 21 days as per the BDC procedures 'D' may in turn lodge the bad delivery for rectification through the BDC against 'A The validity period of reporting such cases will be 36 months from the date of latest transfer by the company ( in the above example 36 months from the date the shares were transferred in the name of 'Z' ). The company will also furnish copies of both sides of transfer deed based on which shares were transferred in favour of 'Z' and 'D' along with the objection memo In case of joint holding, and in the event of death of any of the holders, transfer can take place on the basis of the death certificate accompanying the transfer deed only for a period of two years from the date of the death or ensuing book closure, whichever is later. The Introducing member of a recognised Stock Exchange may certify / attest copy of the death certificate and also issue an identity certificate in case where the name of the deceased on the share certificate is not identical with the name of the death certificate While rectifying objections due to signature differences, a fresh signature by the transferor along with attestations is mandatory if the same transfer deed or a fresh transfer deed along with attestation is mandatory. Clarification : Members are required to submit fresh transfer deeds duly attested for all signature difference cases (even in case of signature difference of authorised signatory, fresh transfer deed signed by a different authorised signatory also needs to be attested) In case Rights/Bonus shares tendered as corporate benefits are reported as bad delivery, if it is odd lot, the value of shares based on the rate prevalent on the day of reporting bad delivery will be paid Rectification/replacement of transfer deed under objection should be in market lot only (even if transfer deed under objection is submitted in nonmarket lot) 105. If Jumbo transfer deed is submitted as company objection, original transfer deeds need not be returned by the receiving member 106. When documents are returned under signature difference, the transfer deed can be attested by the introducing member. If the introducing member is a corporate, the Director or authorised signatory can attest the transfer deed, under his company's stamp, with SEBI Registration Number For reporting as company objections, the transferee portion of the transfer deed should be duly filled in For reporting fake/forged shares as company objection, the following documents are required: A. If they are returned as objection from the company due to the above reason : company objection memo stating that the shares are fake/forged copies of both sides of the transfer deeds 33

34 copies of both sides of the share certificates B. Otherwise one of the following documents are required : public notice given by the company/registrar notification from any stock exchange letter of intimation from the company to stock exchange 109. For reporting missing/lost/stolen shares as objection the following documents are required: A. If they are returned as objection from the company due to above reason : company objection memo stating that the shares are missing/lost/stolen accompanied by a copy of Court Order or FIR or copy of acknowledged police complaint copies of both sides of the transfer deeds copies of both sides of the share certificates B. Otherwise one of the following documents are required : public notice given by the company / registrar notification from any stock exchange letter of intimation from the company to stock exchange. Clarifications : 1. In cases where duplicate shares have been issued to a third party under the provisions of Section 108 (1) A of the Companies Act, the company should also provide the name and address of the third party to whom the duplicate shares have been issued along with the date of request for duplicate shares by the third party. 2. In cases where the companies have issued duplicate certificates for missing/lost/stolen shares, the receiving member is not required to submit FIR/ court order copies, while reporting company objections Attestation is required where signature of transferor is in an Indian language other than the Scheduled languages in India or when the transferor has affixed his thumb impression ( guideline no. 7 ). In other cases, attestation is compulsory only when shares come under objections due to signature difference. Hence guideline Nos. 28, 29, 30, 31 & 32 apply only to transfer deeds which come under objection due to signature difference. In cases where the seller delivers the shares in market lots but the receiving member lodges the shares for transfer with a jumbo transfer deed and the receiving member is not in a position to return all the original transfer deeds submitted with each market lot whilst reporting company objection, the receiving member is required to give an undertaking indemnifying the introducing member in the event of the said original transfer deed(s) being misused at any future date in the prescribed form 6J Additional /Bad Delivery Norms S.No. Description /Bad 1. Securities with transfer deeds bearing the name/rubber stamp of Bad the defaulter/surrendering member/expelled member as an introducing member/delivering member on the Exchange 2. Securities with transfer deeds bearing the name/rubber stamp of Bad defaulter of some other exchange as an introducing/delivering member and notified as bad delivery by the Exchange 3. Delivery of underlying shares of GDR/ADR in physical mode Bad 34

35 4. Delivery of shares by institutional investors viz. domestic financial institutions, banks, mutual funds, pension funds, foreign institutional investors and overseas corporate bodies in physical mode after a specified date 5. Delivery of shares of a scrip by any investor, falling under the list of compulsory trading and settlement in demat mode in Regular Market, after a specified date 6. Delivery of shares by an individual/huf in LP Market exceeding 500 shares on a trade day 7. Delivery of shares by any person other than individual/huf in LP Market 8. All share certificates bearing the stamp "surrendered for dematerialisation" 9. Validity of objection where SEBI Approved /Bad Delivery Norm 97 and Norm 100 are applicable Bad Bad Bad Bad Bad Norm 97 is enforceable 35

36 6. MAINTENANCE OF DEPOSITORY ACCOUNT Depository Account The members shall operate a clearing account with a Depository Participant of the depositories, National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL) for the purpose of settlement of depository deals or for any other purpose as the relevant authority may specify from time to time. 36

37 7. CORE SETTLEMENT GUARANTEE FUND 7.1 Core Settlement Guarantee Fund A Core Settlement Guarantee Fund (Core SGF) shall be maintained in respect of the Equity Cash segment. The administration and utilisation of this fund shall be applicable to such deals as may be prescribed by the relevant authority. The Minimum Required Corpus (MRC) of the Core SGF shall be arrived based on the stress test methodology prescribed by SEBI. ICCL shall compute the Minimum Required Corpus (MRC) for Equity Cash Segment which shall be subject to the following: 1. The MRC shall be fixed for a month. 2. By 15th of every month, ICCL shall review and determine the MRC for next month based on the results of daily stress tests of the preceding month. ICCL shall also review and determine by 15th of every month, the adequacy of contributions made by various contributors and any further contributions to the Core SGF required to be made by various contributors for the next month. 3. For every day of the preceding month, uncovered loss numbers shall be estimated by the various stress tests for credit risk conducted by the ICCL for the segment and highest of such numbers shall be taken as worst case loss number for the day. 4. Average of all the daily worst case loss numbers determined in (3) shall be calculated. 5. The MRC for next month shall be higher of the average arrived in at step (4) and the segment MRC as per previous review. 7.2 Contribution towards Core Settlement Guarantee Fund At any point of time, the contributions of various contributors to Core Settlement Guarantee Fund (SGF) of any segment shall be as follows: a. Clearing Corporation contribution: ICCL contribution to Core SGF shall be at least 50% of the Minimum Required Corpus (MRC). ICCL shall make this contribution from its own funds. ICCL contribution to core SGFs shall be considered as part of its net worth. b. Stock Exchange contribution: Stock Exchange contribution to Core SGF shall be at least 25% of the MRC (can be adjusted against transfer of profit by Stock Exchange as per Regulation 33 of SECC Regulations, which may be reviewed in view of these guidelines). c. Clearing Member primary contribution: If the ICCL wishes, it can seek risk based contribution from Clearing Members (CMs) of the segment (including custodial clearing members) to the Core SGF subject to the following conditions: that total contribution from CMs shall not be more than 25% of the MRC, that no exposure shall be available on Core SGF contribution of any CM (exposurefree collateral of CM available with ICCL can be considered towards Core SGF contribution of CM), and 37

38 that required contributions of individual CMs shall be pro-rata based on the risk they bring to the system. ICCL shall have the flexibility to collect CM primary contribution either upfront or staggered over a period of time. In case of staggered contribution, the remaining balance shall be met by ICCL to ensure adequacy of total Core SGF corpus at all times. Such ICCL contribution shall be available to ICCL for withdrawal as and when further contributions from CMs are received. Any penalties levied by ICCL (as per Regulation 34 of SECC Regulations) shall be credited to Core SGF corpus. Interest on cash contribution to Core SGF shall also accrue to the Core SGF and prorata attributed to the contributors in proportion to their cash contribution. ICCL shall ordinarily accept cash collateral for Core SGF contribution. However, ICCL may accept CM contribution in the form of bank FDs too. ICCL shall adhere to specific guidance which may be issued by SEBI from time to time in this regard. 38

39 8. ANNEXURES Annexure I Format of covering letter to be given by the clearing member for deposit of Fixed Deposit Receipts (FDRs) in ICCL BSE Equity Cash Segment Date : Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Dear Sir, Re: Deposit of Fixed Deposit Receipt towards ICCL BSE Equity Cash Segment. Please find enclosed the following Fixed Deposit Receipt/s (FDR) issued in your favour towards the margin deposit of the ICCL BSE Equity Cash Segment. Sr. No. Bank Name FDR No. FDR Date Maturity Date Amount (Rs.) Yours faithfully, Authorised Signatory (Clg. No. ). 39

40 Annexure II Format of letter to be submitted by the concerned bank alongwith the FDR receipt Date : Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Dear Sir, We refer to deposit receipt (FDR) No... issued in the name of Indian Clearing Corporation Ltd. A/c.. (members s name). Sr. No. FDR Number Issue Date Principal Amount (Rs.) Maturity Date We hereby confirm that, i. There is no lock in period for encashment of the said FDR and the lien on the said FDR has been created in favour of Indian Clearing Corporation Ltd. (ICCL) only. ii. The amount under the said FDR would be paid to ICCL on demand without demure on or before or after the maturity of the said FDR without any reference to M/s... (member s name). iii. The FDR is payable at Mumbai iv. Encashment by ICCL, whether premature or otherwise would not require any clearance from M/s. (member s name) or any other authority/person. v. We agree that on encashment of FDR by ICCL, the interest accrued will also be released to you. vi. We undertake that at the time of encashment of aforesaid FDR No. by M/s. (member name) or any other authority/person, whether premature or otherwise will be done only if the aforesaid FDR No. is accompanied with the release of lien letter issued by ICCL. vii. We undertake that the aforesaid FDR No. would stand automatically renewed by the Bank on the respective maturity dates. Yours faithfully, For (bank). Authorised Signatory (with Bank s stamp) 40

41 Annexure III The General Manager Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Dear Sir, We refer to deposit receipt (FDR) No... issued in the name of Indian Clearing Corporation Ltd. A/c.. (members s name). Sr. No. FDR Number Issue Date Principal Amount (Rs.) Maturity Date The above FDR has been renewed for a further period of months/years under the auto renewal facility on the request of the member. Details are as follows : Sr. No. FDR Number Issue Date Principal Amount (Rs.) Maturity Date We hereby confirm that, i. There is no lock in period for encashment of the said FDR and the lien on the said FDR has been created in favour of Indian Clearing Corporation Ltd. (ICCL) only. ii. The amount under the said FDR would be paid to ICCL on demand without demure on or before or after the maturity of the said FDR without any reference to M/s... (member s name). iii. Old instrument will remain valid and no new instrument with new FDR No is issued. iv. The FDR is payable at Mumbai v. Encashment by ICCL, whether premature or otherwise would not require any clearance from M/s. (member s name) or any other authority/person. vi. We agree that on encashment of FDR by ICCL, the interest accrued will also be released to you. vii. We undertake that at the time of encashment of aforesaid FDR No. by M/s. (member name) or any other authority/person, whether premature or otherwise will be done only if the aforesaid FDR No. is accompanied with the release of lien letter issued by ICCL. viii. We undertake that the aforesaid FDR No. would stand automatically renewed by the Bank on the respective maturity dates. Yours faithfully, For (bank). Authorised Signatory (with Bank s stamp) 41

42 Annexure IV Format of covering letter to be given by the clearing member for deposit of renewed Fixed Deposit Receipt in ICCL BSE Equity Cash Segment Date : Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Dear Sir, Re: Deposit of renewed Fixed Deposit Receipt towards ICCL BSE Equity Cash Segment. We refer to following Fixed Deposit Receipt issued on our behalf in your favour towards the margin deposit of the ICCL BSE Equity Cash Segment : Sr. No. FDR No. Issue Date Amount (Rs.) Maturity Date The above Fixed Deposit Receipt/s has been renewed for a further period the details are as follows : Sr. No. New FDR No. Issue Date New Amount (Rs.) New Maturity Date Yours faithfully, Authorised Signatory (Clg. No. ). 42

43 Annexure V (on letter head of the bank ) Date : DD/MM/YYYY Indian Clearing Corporation Ltd. (ICCL) 25 th Floor, Phiroze Jeejeebhoy Towers Dalal Street, Fort, Mumbai Re. : New Bank Guarantee/s for various segments of BSE with ICCL Dear Sir, We confirm having issued the following bank guarantee/s favouring yourself on behalf of (clearing member name). Bank Guarantee No. Expiry Date Amount ( Rs ). We also confirm that the persons who have signed the above guarantee(s) are authorized signatories of the bank. Yours faithfully, For (bank name) Authorised Signatory 43

44 Format of Bank Guarantee towards fulfillment of various requirements/liabilities/obligations of Clearing Member in relation to various segments of BSE Letter of Guarantee in favour of Indian Clearing Corporation Ltd. (ICCL) for various segments of BSE Ltd. BG No. : From: BG Date : Insert Name & Address of the Bank (hereinafter referred to as "the Bank") To Indian Clearing Corporation Ltd. 25 th Floor, Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai (hereinafter referred to as "ICCL") WHEREAS: (i) (Delete inapplicable portion >>>>) Mr./Ms./M/s., an individual / a sole proprietary concern / a partnership firm / a body corporate, registered / incorporated under the provisions of the Indian Partnership Act, 1932 / the Companies Act, 1956, having his / her / its Registered Office at is a Clearing Member of ICCL for various segments of BSE (BSE Segments) having Clearing No., hereinafter referred to as Clearing Member (which expression shall unless repugnant to the context or meaning thereof be deemed to mean and include his / her / its successors, administrators and permitted assigns); (ii) As per the Rules, Bye-laws and Regulations of the Indian Clearing Corporation Ltd ( ICCL )/BSE Ltd ( BSE ) and in pursuance of various notices/circulars issued by the Securities and Exchange Board of India ( SEBI )/RBI/ICCL/BSE, all its Clearing Members are required to maintain with ICCL, collateral towards the /Additional Capital 44

45 BG No. : BG Date : in the form of Cash or Fixed Deposit of Banks or approved Securities or Bank Guarantees etc. after applying suitable haircut/margins, as prescribed by ICCL from time to time. (iii) (iv) (v) Clearing Members of the ICCL are also required to keep a certain amount as additional liquid asset with ICCL for availing of the trading limits and / or adjustment against margins prescribed by ICCL from time to time. Clearing Members are also required to pay to ICCL, various types of margins (comprising, inter alia, of gross exposure, mark to market, Value at Risk margin, Special margins, Extreme Loss margins, additional volatility margins, etc.) or any other margins in cash or any other form of collateral based on their exposure and volume of the business done by them in BSE Segments from time to time. Clearing Members are also required to fulfil their engagements, commitments, obligations arising out of Trading, Clearing & Settlement System of BSE/ICCL (vi) ICCL requires that the maintenance of / additional capital (Liquid Assets) / payment of various margins and fulfillment of all requirements/liabilities/obligations arising under the Rules, Bye-laws and Regulations of ICCL and/or instructions/directions issued by ICCL from time to time in relation to BSE Segments may be secured by the Clearing Members, inter alia, by executing a Bank Guarantee, in favour of ICCL. (vii) (viii) At the request of the Clearing Member, ICCL has agreed to accept a Bank Guarantee issued in its favour from a Scheduled Bank for an amount of Rs., (Rupees only) in lieu of equivalent, additional capital (liquid assets) requirement, various margin payments and to meet his/ its requirements, obligations and commitments as aforesaid. The Clearing Member has requested the Bank to furnish to ICCL a guarantee of Rs. (Rupees only). IT IS HEREBY AGREED BY THE BANK AS UNDER:- 1. We, the above mentioned Bank at the request and desire of the Clearing Member of ICCL do hereby irrevocably and unconditionally guarantee to pay Rs. (Rupees ) to ICCL as a security for, additional 45

46 BG No. : BG Date : capital ( liquid assets ), various margin requirements and due performance and fulfillment by the Clearing Member of his / its requirements, engagements, commitments, operations, obligations or liabilities arising under the Rules, Bye-laws and Regulations and/or pursuant to instruction/direction issued by ICCL in relation to BSE Segments. The Bank agrees and confirms that the said guarantee shall be available as a security for meeting, satisfying, discharging or fulfilling all or any obligations or liabilities of the Clearing Member. 2. The Bank hereby agrees that if in the opinion of ICCL, the Clearing Member has been or may become unable to meet, satisfy, discharge or fulfil any requirements, obligations, liabilities or commitments or any part thereof to ICCL as aforesaid, then without prejudice to the rights of ICCL under its Rules, Bye-laws and Regulations or otherwise, ICCL, may at any time thereafter and without giving any notice to the Clearing Member invoke this guarantee to meet the obligations, liabilities or commitments of the Clearing Member. 3. The Bank undertakes that it shall on first demand of the ICCL, without any demur, protest or contest and without any reference to the Clearing Member and notwithstanding any contest by the Clearing Member, pay to ICCL sums not exceeding Rs. (Rupees ) as may be demanded by ICCL. The decision of the ICCL from time to time as to the requirements or obligations or liabilities or commitments of the Clearing Member and the amount claimed shall be final and binding on the Bank. 4. This guarantee shall not be prejudiced by the failure of the Clearing Member to comply with the Rules, Bye-laws or Regulations of ICCL/BSE. ICCL/BSE shall be at liberty to vary, amend, change or alter any terms or conditions or its Rules or Byelaws or Regulations relating to membership of ICCL in general or as applicable to the Clearing Member in particular without thereby affecting its rights against the Clearing Member or the Bank or any security belonging to the Clearing Member now or hereafter held or taken by ICCL, at any time. The discretion to make demands under this guarantee shall exclusively be that of ICCL and ICCL is entitled to demand hereunder notwithstanding being in possession of any deposits or other securities of the Clearing Member. 5. The validity of this guarantee shall not be affected in any manner whatsoever if ICCL takes any action against the Clearing Member including default, suspension or expulsion of the Clearing Member from ICCL. 46

47 BG No. : BG Date : 6. This guarantee shall not be affected by any change in the constitution of ICCL or the Clearing Member or the Bank and it shall remain in force notwithstanding any forbearance or indulgence that may be shown by ICCL to its Clearing Member. 7. The Bank undertakes to pay to ICCL, the amount hereby guaranteed within forty eight hours (excluding any holidays or bank strike) of being served with a written notice requiring the payment of the amount to the Branch Manager of the Bank's Branch office address stated hereinabove or to such other address as ICCL may be aware of either by hand delivery or by Registered Post or by Speed Post or by Courier Service. 8. The Bank hereby consents to ICCL for: (i) Making any variance, change or modification of any agreement with the Clearing Member and/ or others as ICCL thinks fit; and (ii) Giving time to the Clearing Member for payment of any sums due from the Clearing Member; and (iii) Making any composition with the Clearing Member; and (iv) Releasing or parting with any security and/ or (v) Agreeing not to sue the Clearing Member. 9. The Bank irrevocably agrees that this guarantee shall not be avoided, released or prejudicially affected and the Bank shall not be discharged from its liability hereunder to ICCL by reason of the aforesaid or by reason of any act or omission by ICCL, the legal consequence whereof may be to discharge the Clearing Member and/ or the Bank or by any act or omission by ICCL which would, but for this provision, be inconsistent with the Bank's right as a surety. The Bank agrees that this guarantee shall remain valid and enforceable notwithstanding any forbearance or delay in the enforcement of the terms of the contract between the Bank and Clearing Member or of ICCL s Rules, Bye-laws and Regulations. The Bank waives all the rights available to the Bank as surety under Section 133,134,135,139 and 141 of the Indian Contract Act, 1872 or any amendment thereof. The Bank also agrees that the Bank shall not be entitled to the benefit of subrogation to any security held by ICCL. 47

48 BG No. : BG Date : 10. The Bank agrees that in the event of ICCL now or at any time hereafter holding any security, the Bank shall not be entitled to the benefit of such security or to receive such security notwithstanding that the Bank may have made payment under this guarantee. 11. The Bank undertakes not to revoke this guarantee during its currency except with the previous consent of ICCL in writing and this guarantee shall be continuous and irrevocable. 12. The Bank hereby states that this guarantee is not issued on the basis of any arrangement with or counter guarantee of any other Bank. 13. Notwithstanding anything mentioned hereinbefore, the aggregate liability of the Bank under this guarantee is restricted to Rs. (Rupees ) and it will remain in force for a period of months i.e. upto day of. 14. Unless a claim/demand in writing is made against the Bank under this guarantee before the expiry of three months from the aforesaid date i.e. on or before day of, all rights of ICCL under this guarantee shall cease and the Bank shall be relieved and discharged from all liabilities thereunder. Executed at, this day of, For (Bank) (Name of the Branch) Sd. /- Authorized Signatories Seal of the Bank 48

49 Annexure VI Format of covering letter to be given by the clearing member for deposit of bank guarantee in ICCL BSE Equity Cash Segment Date : Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Dear Sir, Re: Deposit of Bank Guarantee towards ICCL BSE Equity Cash Segment Please find enclosed the following bank guarantee/s (BG) issued on our behalf in your favour towards the margin deposit of the ICCL BSE Equity Cash Segment. Sr. No. Bank Name BG No. BG Date Maturity Date Claim Date Amount (Rs.) Yours faithfully, Authorised Signatory (Clg. No. ). 49

50 Annexure VII (Bank s letterhead ) Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Re. : Renewal of Bank Guarantee(s) ICCL BSE Equity Cash Segment. Dear Sir, We confirm having issued the following bank guarantees(s) favouring yourself on behalf of (clearing member name ). Bank Guarantee No. Expiry Date Amount ( Rs ). We also confirm that the persons who have signed the above guarantee(s) are authorized signatories of the bank. Yours faithfully, For (bank name ) Authorised Signatory 50

51 Format of Renewal of Bank Guarantee towards Base Minimum Capital and Additional Capital (Liquid Assets) (To be on Stamp/Franked Paper of Rs.100/- or the value prevailing in the State where executed, whichever is higher) Letter of renewal of Guarantee in favour of Indian Clearing Corporation Ltd. (ICCL) for Equity Cash Segment of BSE Ltd. BG No. :. From: BG Date:. Insert Name & Address of the Bank (hereinafter referred to as "the Bank") To Indian Clearing Corporation Ltd. (BSE Equity Cash Segment) 25 th Floor, Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai We (bank name ) a body corporate constituted under the Companies Act 1956 having our Registered Office at ( Bank s address ) and our branch office at ( branch office address ), refer to the Bank Guarantee Bearing No. (original BG No. ) executed by us on the (original BG date) at Mumbai (hereinafter referred to said bank guarantee) on account of (Clearing Member Name) (hereinafter referred to as a clearing member) for a sum of Rs. /- (Rupees only ) in your favour. We now at the request of the Clearing member further extend the period of the said guarantee by months, i.e. from to and unless a demand under this guarantee is made on us in writing by you within three months after the date of expiry of this guarantee, i.e., on or before, all your rights under this guarantee shall cease and the bank shall be relieved and discharged from all liabilities hereunder. 51

52 We hereby affirm and confirm that save and except to the extent as provided for hereinabove, the said guarantee together with all other terms and conditions therein shall remain operational and in full force and effect till. Now withstanding anything contained herein our liability under this Bank Guarantee shall not exceed Rs. /- (Rupees only). This Bank Guarantee shall be valid upto. And we are liable to pay the guarantee amount or pay part thereof under this Bank Guarantee only and only if you serve upon us a written claim on or before. (date of expiry of the claim period ). Sign for and on behalf of (bank name ) on this the, Mumbai. Yours truly, For (bank name) Branch Authorized Signatories 52

53 Annexure VIII Format of covering letter to be given by the clearing member for deposit of renewed bank guarantee in ICCL BSE Equity Cash Segment Date : To Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Dear Sir, Re: Deposit of renewed Bank Guarantee towards ICCL BSE Equity Cash Segment. We refer to following Bank Guarantees issued on our behalf in your favour towards the margin deposit of the ICCL BSE Equity Cash Segment : Sr. No. BG No. Issue Date Amount (Rs.) Maturity Date Claim Date The above bank guarantees has been renewed for a further period the details are as follows : Sr. No. New BG No. Issue Date Amount (Rs.) New Maturity Date New Claim Date Yours faithfully, Authorised Signatory (Clg. No. ). 53

54 Annexure IX Deed of Pledge DEED OF PLEDGE TO DEPOSIT APPROVED SECURITIES TOWARDS BASE MINIMUM CAPITAL AND ADDITIONAL CAPITAL (Liquid Assets) WITH INDIAN CLEARING CORPORATION LIMITED FOR THE EQUITY CASH SEGMENT OF BSE LTD. This Deed of Pledge (hereinafter referred to as the Deed is executed at this...day of..., 20 By Mr./Ms./M/s., an individual/ a sole proprietary concern/ a partnership firm/ a body corporate, registered/incorporated under the provisions of the Indian Partnership Act, 1932/the Companies Act, 1956, having his/her/its Registered Office at. is a clearing member of the Indian Clearing Corporation Limited (ICCL), for the Equity Cash Segment of BSE Ltd. having Clearing No.., (hereinafter referred to as the Clearing Member, which expression shall unless repugnant to the context or meaning thereof be deemed to mean and include his/her heirs, legal representatives, executors and administrators/ the partners for the time being of the said firm, the survivor or survivors of them and the heirs, executors and administrators of such last survivor /its successors and assigns, as the case may be); In favour of Indian Clearing Corporation Limited, a company incorporated under the Companies Act, 1956 and having its registered office at 25 th Floor, P. J. Towers, Dalal Street, Fort, Mumbai (hereinafter referred to as "ICCL" which expression shall unless it be repugnant to the context or meaning thereof, be deemed to mean and include its successors and permitted assigns) WHEREAS (ix) (x) Mr./Ms./M/s., is a Clearing Member of ICCL for the Equity Cash Segment of BSE LTD.; and As per the Rules, Bye-laws and Regulations of the ICCL and in terms of the notices/circulars issued by ICCL/SEBI in this regard, all Clearing members of the BSE Equity Cash Segment of ICCL ( hereinafter referred to as ICCL- BSE Equity Cash Segment ) shall maintain with ICCL the prescribed collateral security towards the Base Minimum Capital and contribution to the Trade Guarantee Fund. Further, a Clearing Member desirous of availing additional exposure shall deposit with ICCL the requisite collateral security towards additional capital (Liquid Assets) for the due performance by him, of his engagements, commitments, operations, obligations or liabilities as a Clearing member of ICCL arising out of the transactions done by such Clearing member as per the Rules, Bye-laws and Regulations of ICCL. The collateral security to be deposited towards Base Minimum Capital or 54

55 (xi) (xii) additional capital ( Liquid Assets ) may be in the form of Cash, FDR of approved Banks or approved Securities, Bank Guarantees, Government Securities and the units of the approved Mutual Funds; after applying suitable haircut/margins, as prescribed by the ICCL-BSE Equity Cash Segment from time to time; and Clearing members of ICCL BSE Equity Cash Segment are also required to keep certain amount as additional liquid assets with the ICCL BSE Equity Cash Segment for availing of the trading limit prescribed by the ICCL BSE Equity Cash Segment from time to time; and Clearing members of ICCL BSE Equity Cash Segment are also required to pay to ICCL BSE Equity Cash Segment margins on an up front basis and settlement variation on account of daily mark to market or any other margin that may be prescribed by the ICCL BSE Equity Cash Segment from time to time in cash or any other form of collateral based on their exposure and volume of the business done by them in the ICCL BSE Equity Cash Segment; and (xiii) Clearing members of ICCL BSE Equity Cash Segment are also required to fulfill their engagements, commitments, obligations arising out of trading & settlement system of the ICCL BSE Equity Cash Segment; and (xiv) (xv) (xvi) ICCL BSE Equity Cash Segment requires that the maintenance of Base Minimum Capital and additional liquid assets/ payment of various margins as also the obligations arising out of the clearing and settlement of the trades executed on the ICCL BSE Equity Cash Segment may be secured by its Clearing members, inter alia, by executing a Deed to pledge to deposit the approved Securities (after applying suitable hair-cut) more particularly mentioned in the Schedule in its favour; and At the request of the Clearing Member, ICCL has agreed to accept the approved securities pledged in its favour, as per the norms prescribed by ICCL from time to time and to meet his/its obligations and commitments under the trading & settlement system of ICCL BSE Equity Cash Segment; and The Clearing Member shall deposit the approved securities with Custodian of ICCL as may be determined and notified by ICCL from time to time. NOW, THIS DEED OF PLEDGE WITNESSETH AS FOLLOWS: 1. In consideration of ICCL BSE Equity Cash Segment having agreed to accept the approved securities for Base Minimum Capital and additional liquid asset, the Clearing Member hereby pledges the securities (hereinafter referred to as the "the Said Securities") and ICCL hereby accepts the first and present security interest in (i) the securities (ii) all dividends/interest/redemption (iii) all additional securities and (iv) such other collateral listed in the Schedule hereto to secure and performance of all obligations of the Clearing Member under this Deed of Pledge. The Said Securities shall include all the securities deposited from time to time (in addition, substitution or replacement thereof) with ICCL as security for due performance and fulfillment by him/them of all engagements, 55

56 commitments, operations, obligations or liabilities as a Clearing Member of ICCL BSE Equity Cash Segment arising out of or incidental to any contracts made, executed, undertaken, carried out or entered into by him/them as per the Rules, Bye-laws and Regulations of the ICCL. 2. The Clearing Member, if so determined by ICCL BSE Equity Cash Segment, shall place the Said Securities in the absolute disposition of such custodian/depository participant in such manner as decided by the ICCL BSE Equity Cash Segment and such possession and disposition may be apparent and indisputable notwithstanding the fact that the Clearing Member may be permitted to have access to the Said Securities in the manner and subject to such terms and conditions as may be determined by ICCL BSE Equity Cash Segment. The Clearing Member confirms, affirms and covenants with ICCL BSE Equity Cash Segment that during the period of the Said Securities remaining in possession and disposition of the custodian/depository participant as decided by the ICCL BSE Equity Cash Segment, he/they shall do all such acts and things, sign such documents and pay and incur such costs, taxes including capital gain tax or related tax demand/s, debts and expenses as may be necessary without prejudice to any other obligations, liabilities, duties which he/they owe as a Clearing Member of ICCL BSE Equity Cash Segment. The Clearing Member agrees that the applicable charges for the pledging and unpledging of securities shall be solely borne by the Clearing Member. 3. The Clearing Member represents, declares and assures that all the Said Securities (a) are in existence, (b) are owned by him/them, (c) are free from any prior charge, lien, encumbrance, (d) not subject to any lock-in, and further that all the Said Securities over which pledge may be created in future would be in existence and owned by him/them at the time of creation of such pledge and that all the Said Securities to be given in future as security to ICCL will be unencumbered, absolute and disposable property of the Clearing Member. 4. In respect of such of the Said Securities as belong to the constituents of the Clearing Member, the Clearing Member represents, declares and assures that (a) all the Said Securities are in existence, are owned by its constituents, are in the possession/custody of the Clearing Member in the ordinary course of the Clearing Member s business, are free from any prior charge, lien, encumbrance and are not subject to any lock-in, (b) the Clearing Member has been expressly authorised in writing by the constituents, who own the Said Securities to pledge the same in favour of ICCL and to incur such costs, charges and expenses for and on behalf of the constituent as the Clearing Member may deem necessary in respect of such pledge, and (c) that all of the above representations, assurances and declarations shall remain true, valid and binding upon the Clearing Member in respect of all securities that may hereafter be pledged by the Clearing Member in pursuance of this Deed of Pledge. 5. The Clearing Member agrees that he/they shall not without the written permission from ICCL BSE Equity Cash Segment create any charge, lien or encumbrance of any kind upon or over the Said Securities hereby pledged to ICCL BSE Equity Cash Segment. The Clearing Member further agrees that he/they shall not permit any charge, lien or encumbrance to be created and shall not do or allow anything to be done that may prejudice the Said Securities while 56

57 he/they remain liable to ICCL BSE Equity Cash Segment, in any manner, without the prior written permission of the ICCL BSE Equity Cash Segment. 6. The Clearing Member agrees that he/they shall also similarly pledge all corporate actions/benefits in respect of the Said Securities if the depository/custodian does not automatically pledge the same. 7. The Clearing Member agrees, declares, and undertakes that he/they shall be bound and shall abide by the terms and conditions of the scheme for the deposit of securities as formulated and determined by the ICCL BSE Equity Cash Segment, for security towards liquid assets and/or additional liquid assets, either in their existing form or as modified/amended from time to time. 8. The Clearing Member is aware and agrees that in accordance with the Rules, Bye-laws & Regulations of the ICCL and Bye-law 5.1 in particular, the Said Securities shall be subject to a first and paramount lien for any sum due to the ICCL and all other claims against the Clearing Member for fulfillment of engagements, obligations and liabilities of Clearing Members arising out of or incidental to any Dealing made subject to the Bye-Laws, Rules and Regulations of ICCL. 9. If in the opinion of ICCL BSE Equity Cash Segment, the Clearing Member has failed to perform and/or fails to fulfill his/their engagements, commitments, operations, obligations or liabilities as a Clearing Member of ICCL BSE Equity Cash Segment arising out of or incidental to any dealings made by him/them in accordance with the Rules, Bye-laws and Regulations of the ICCL, then the Clearing Member agrees that the ICCL BSE Equity Cash Segment as a pledgee, on giving one working day s notice to the Clearing Member, shall be empowered/ entitled to invoke the pledge, and to sell, dispose of or otherwise effect any other transfer of the Said Securities in such manner and subject to such terms and conditions as ICCL BSE Equity Cash Segment may deem fit and that the money, if any, realised from such pledge/sale/disposal/or other transfer of the Said Securities shall be utilised/disbursed by the ICCL BSE Equity Cash Segment in such manner and subject to such terms and conditions as ICCL BSE Equity Cash Segment may deem fit and further the Clearing Member shall do all such things, deeds, acts and execute such documents as are necessary to enable the ICCL BSE Equity Cash Segment to effect such pledge/sale/disposal/ or other transfer of the Said Securities. The decision of the ICCL BSE Equity Cash Segment as to the obligations or liabilities or commitments of the Clearing Member and the amount claimed shall be final and binding on the Clearing Member. The Clearing Member agrees that one working day notice mentioned above shall be deemed to be a reasonable notice. 10. All dividends/interests hereinafter declared on or payable with respect to any approved securities during the term of the Deed will be immediately delivered to the ICCL BSE Equity Cash Segment to be held under this Deed of Pledge. Notwithstanding this Deed of Pledge, so long as the Clearing Member owns the securities and no event of default has occurred in fulfilling its obligations or liabilities, the Clearing Member will be entitled to vote any shares comprising the collateral, subject to any proxies granted by the Clearing Member, if law permits. 57

58 11. In the event that during the term of this Deed of Pledge, any stock dividend, reclassification, readjustment, stock split or other change is declared or made with respect to the collateral, or if warrants or any other rights, options or securities are issued in respect of the collateral (the Additional Securities ) then all new, substituted and/ or additional shares or other securities issued by reason of such change or by reason of the exercise of such warrants, rights, options or securities, if delivered to the Clearing Member, immediately surrendered to ICCL, will be pledged to the ICCL BSE Equity Cash Segment to be held under the terms of this Deed of Pledge as and in the same manner as the collateral is held hereunder. 12. Until all obligations and liabilities of the Clearing Member are fulfilled and under this Deed of Pledge have been satisfied in full, all collateral will continue to be held in pledge under this Deed of Pledge. 13. The Clearing Member shall, at the request of the ICCL BSE Equity Cash Segment, execute and deliver such further documents and take such further actions as ICCL BSE Equity Cash Segment shall reasonably request to perfect and maintain the security interest of the ICCL BSE Equity Cash Segment in the collateral, or in any part thereof. 14. This Deed of Pledge will inure to the benefit of the respective heirs, personal representatives, successors and assigns of the parties hereto. 15. The Said Securities pledged as security shall be available at the disposal of ICCL BSE Equity Cash Segment as a continuing security and remain available in respect of the obligations, liabilities or commitments of the Clearing Member jointly or severally and may be utilised as such in the discretion of the ICCL BSE Equity Cash Segment, as if each of the obligations, liabilities or commitments is secured by the Said Securities. This Deed shall not be considered as cancelled or in any way affected on its utilisation for meeting any specific obligation, liability or commitment by the ICCL BSE Equity Cash Segment, but shall continue and remain in operation in respect of all subsequent obligations, liabilities or commitments of the Clearing Member. 16. The Clearing Member agrees to execute such further documents whether of a legal nature or otherwise as may be required by ICCL BSE Equity Cash Segment for the purpose of giving effect to the provisions of this Deed and the scheme for the deposit of securities. 17. The Clearing Member agrees that deposit of the Said Securities and pledge thereof shall not be affected in any manner whatsoever if ICCL BSE Equity Cash Segment takes any action against the Clearing Member including suspension or expulsion or declaration of the Clearing Member as a defaulter. 18. The Clearing Member agrees that ICCL BSE Equity Cash Segment shall not be under any liability whatsoever to the Clearing Member or any other person for any loss, damage, expenses, costs etc, arising out of the deposit of the Said Securities, in any manner, due to any cause, whatsoever, irrespective of whether the Said Securities shall be in the possession of the ICCL BSE Segment or not at the time of such loss or damage or the happening of the cause thereof. The Clearing Member shall at all times indemnify and keep indemnified ICCL BSE Equity Cash Segment of ICCL from and against all suits, proceedings, costs, charges, claims and demands whatsoever that may at any time arise or be 58

59 brought or made by any person against ICCL BSE Equity Cash Segment in respect of any acts, matters and things lawfully done or caused to be done by the ICCL BSE Equity Cash Segment of in connection with the Said Securities or in pursuance of the rights and powers of ICCL BSE Equity Cash Segment under this Deed. 19. The Clearing Member shall be released from its obligations/liabilities/commitments under this Deed only when ICCL BSE Equity Cash Segment in writing expressly provides for the same. 20. The Clearing Member agrees that ICCL BSE Equity Cash Segment shall be entitled to sell, dispose of or otherwise transfer the Said Securities and to execute transfer documents and/or any other necessary documents, wherever applicable or other endorsements for this purpose and that ICCL BSE Equity Cash Segment shall be entitled to receive from the Clearing Member all expenses incurred by the ICCL BSE Equity Cash Segment custodian/ depository participant for the aforesaid purposes. 21. The Clearing Member undertakes that the deposit of the Said Securities and pledge thereof shall be binding on him/them as continuing and that the same shall not be prejudiced by his/their failure to comply with the Rules, Bye-laws or Regulations of the ICCL in their existing form or as modified/altered/ amended from time to time. 22. No change whatsoever in the constitution of the Clearing Member during the continuance of this Deed shall impair or discharge the liability of the Clearing Member hereunder. SCHEDULE... IN WITNESS WHEREOF the Clearing Member has executed these presents on the day and year first hereinabove mentioned. Signed, sealed and delivered by the within named Clearing Member Mr./ M/s In the presence of witnesses : (Name, address and signature of witnesses)

60 Note : (Signature and stamp in all pages by) 1. Clearing Member in case of individual. 2. All partners in case of a Partnership Firm. 3. By any two of the following persons in case of a company. a) Managing Director b) Whole-time Director c) Directors. (A certified true copy of the Board Resolution, authorising the signatory to sign this deed, to be submitted in case of a company). 4. By Authorized Signatory as approved by the Bank, in case of a Bank. 60

61 (Company s Letter Head) CERTIFIED TRUE COPY OF THE BOARD RESOLUTION PASSED AT THE MEETING OF THE BOARD OF DIRECTORS OF DULY CONVENED AND HELD ON THE DAY OF, 20, AT THE REGISTERED OFFICE OF THE COMPANY SITUATED AT. RESOLVED THAT the Company do hereby pledge and un-pledge the approved securities towards Base and Additional Capital in favour of Indian Clearing Corporation Ltd.(ICCL), Mumbai. RESOLVED FURTHER THAT for the purpose of depositing of securities towards Base and Additional Capital by way of pledge in favour of the Indian Clearing Corporation Ltd.(ICCL), Mumbai the Company do hereby execute and sign the Deed of Pledge and the following Director(s)/Authorised Representative(s) of the Company are jointly and severally authorized to sign all documents, papers, applications, deeds related to pledge and un-pledge the securities on behalf of the Company. RESOLVED FURTHER THAT any one of the Director of the Company is hereby authorized to execute and sign the said deeds and affixed Common Seal if required as per the Article of association of the Company. RESOLVED FURTHER THAT the Certified true copy of the resolution be forwarded to the Indian Clearing Corporation Ltd. (ICCL), Mumbai for necessary action and records. The following are the Authorized Signatories: NAME DESIGNATION SIGNATURE Certified to be True Copy For Place: Date: Director (Signature and Company Stamp) 61

62 Annexure X Procedure for deposit and withdrawal of Government of India Securities (G- Sec)/T-Bills as collateral towards Liquid Assets in Equity Cash Segment Only approved G-Sec/T-Bills from the list with residual maturity of a minimum period of one year from the date of transfer of same will be accepted. The same is available on website. Process for depositing G-Sec/T-Bills: Members desirous of providing G-secs will inform ICCL about the details of such G-Secs in the format enclosed as Annexure - I. A copy of such letter should be sent to ICCL (Fax No ) or at [email protected] The details filled in said form by the Member brokers need to be entered into in the Ekuber System under Margin Transfer Module before 4.00 p.m. for transfer of securities to the following CSGL account of ICCL. Account Name : Indian Clearing Corporation Ltd. - CSGL Account CSGL Account No. : The process of transfer shall get completed on confirmation of the transfer instructions received by ICCL through EKUBER for acceptance of the said Govt. Securities. Members may note that the valuation of G-Secs shall be based on the latest available closing price (subject to a minimum hair-cut of 10%) of G-Secs. Process for withdrawal of G-Secs For withdrawal of G-Secs (deposited towards Liquid Assets with ICCL), members will be required to send the release request in the prescribed format (Annexure-II) by 4:00 pm, on a working day to ICCL. Member brokers may note that the periodic coupon/redemption payments received on such G-Secs will be distributed/passed by ICCL to concerned Clearing Members by crediting the same to their settlement accounts with the designated clearing banks upon receipt of amount from RBI. The approved G-Sec/T-Bills which are in SHUT PERIOD will not be accepted. 62

63 Annexure I (Format of covering letter to be given by the member for deposit of Government Securities) (To be typed on Member s letter head) (ICCL BSE Equity Cash Segment) Date: To, Indian Clearing Corporation Ltd (ICCL) Mumbai Dear Sir / Madam, Re: Request for Addition of Securities (G-Sec / T-Bills ) as Collaterals We would like to deposit below mentioned G-Sec / T-Bill as Margin Deposit in BSE Equity Cash Segment: Details are as under: (Ekuber Ref No # ) : Member ID Member Name Source SGL A/c no Source SGL A/c Holder Name Instrument details ISIN no. Maturity Date Face Value (in digits & words) Qty. Further, we have initiated transfer of securities to CSGL account ( ) of ICCL, vide Margin Transfer module through Ekuber System. You are requested to confirm the same and consider the above G-Sec / T-Bills towards our margin deposit. We would like to inform you that since this transfer of securities is on account of margin deposit and the same is been settled through Margin Transfer module, no monetary consideration is involved in this transaction. Declaration : These Margin Transfer of Government Securities pertain to margins submitted towards trade in Equity Cash Segment Thanking you, Yours faithfully, Authorised Signatory 63

64 Annexure II (Format of covering letter to be given by the member for deposit of Government Securities) Date: To, Indian Clearing Corporation Ltd (ICCL) Mumbai (To be typed on Member s letter head) (ICCL BSE Equity Cash Segment) Dear Sir / Madam, Re: Request for withdrawal of Securities (G-Sec / T-Bills ) as Collaterals We would like to withdraw below mentioned G-Sec / T-Bill as Margin Deposit in BSE Equity Cash Segment: Details are as under: (Ekuber Ref No # ) : Member ID Member Name Source SGL A/c no Source SGL A/c Holder Name Instrument details ISIN no. Maturity Date Face Value (in digits & words) Qty. We would like to inform you that since this transfer of securities is on account of margin deposit and the same is been settled through Margin Transfer module, no monetary consideration is involved in this transaction. Declaration : These Margin Transfer of Government Securities pertain to margins submitted towards trade in Equity Cash Segment. Thanking you, Yours faithfully, Authorised Signatory 64

65 Annexure XI Letter of extension of scope of guarantee in favour of Indian Clearing Corporation Ltd. (ICCL) from one trading segment to any other trading segment of BSE BG No. :. From: BG Date :. Insert Name & Address of the Bank (hereinafter referred to as "the Bank") To Indian Clearing Corporation Ltd. 25 th Floor, Phiroze Jeejeebhoy Towers, Dalal Street, Fort, Mumbai We,, having registered office at and having branch amongst others at, refer to the Bank Guarantee No. issued by us on day of at (hereinafter referred to as "said Guarantee") on behalf of (hereinafter referred to as "Clearing Member") having its registered office at for a sum of Rs. (Rupees only) issued in favour of ICCL BSE Equity Cash Segment / ICCL BSE Equity Derivatives Segment / ICCL BSE Currency Derivatives Segment. The said bank guarantee was issued to cover the Clearing Member's collateral requirements, margin requirements, settlement & other obligations in the ICCL-BSE Equity Cash Segment/ICCL-BSE Equity Derivatives Segment / ICCL- BSE Currency Derivatives Segment. We, the above mentioned Bank at the request and desire of the said Clearing Member, do hereby irrevocably and unconditionally agree to extend the scope of the said guarantee to cover the liabilities/obligations of the Clearing Member arising out of the collateral requirements and various margins, settlement & other obligations of the ICCL BSE Equity Derivatives Segment, ICCL BSE Equity Cash Segment, ICCL BSE Currency Derivatives Segment, ICCL BSE SLB Segment and ICCL BSE New Debt Segment and any of the Segments of ICCL- BSE of which the said Clearing 65

66 member is admitted as a Clearing Member as may be determined by BSE/ICCL from time to time without demur/protest or reference to the Clearing Member. We agree that the said Clearing Member is admitted to the membership of various segments of BSE/ICCL and that the Bank Guarantee amount specified in the above referred Bank Guarantee document is available for meeting the liabilities/obligations of any of the clearing segments as aforesaid. All other provisions of the said Bank Guarantee would remain unchanged. Executed at, this day of,. For (Bank) (Name of the Branch) Sd. /- Authorized Signatories Seal of the Bank 66

67 Annexure XII Example of member s gross open position for the purpose of VaR & ELM margins Sett. No. Scrip. Client ID. Purchase Qty (+) Sale Qty(-) Net Qty. 001/05- Security X A Security X. Proprietory 300 nil Position. Security Y B Nil Security Y A 500 Nil Security Z. C Security Z B /05-06 Security X A Security X B Security Y B Nil Security Z Proprietory position Security Z C Nil Member s gross position :- Scrip. Sett. No. Gross Position Qty. Security X 001/ Security Y 700 Security Z 600 Security X 002/ Security Y 200 Security Z

68 Annexure XIII Methodology for computation of MTM Margin For a Client A, his MTM profit/ loss would be calculated separately for his positions on T-1 and T day (two different rolling settlements). For the same day positions of the client, his losses in some securities can be set off/netted against profits of some other securities. Thus, we would arrive at the MTM loss/profit figures of the two different days T and T-1. These two figures cannot be netted. Any loss will have to be collected and same will not be set-off against profit arising out of positions of the other day. Thus, as stated above MTM profits / losses would be computed for each of the clients; Client A, Client B, Client C etc. As regards collection of margin from the broker, the MTM would be grossed across all the clients i.e. no setoff of loss of one client with the profit of another client. In other words, only the losses will be added to give the total MTM loss that the broker has to deposit with the exchange. Total Client Security T-1 day T day profit/loss of Client Client A Security X Security Y Total MTM for broker Client B Security Z Security W Total Client C Security X Security Z Total Client D Security Y Security R Total Member In this example, the broker has to deposit MTM Margin of Rs

69 Annexure XIV Procedure for early pay in Members intending to avail the margin exemptions on their sale trades in the Equity Cash Segment can do so by delivering the demat shares towards early pay-in from either of the two depositories viz; CDSL or NSDL. For early pay-in of securities in CDSL, members are required to transfer the securities that they intend to deliver as early pay-in, in the specific CDSL account opened by ICCL in the specific settlement number in which they have sold the securities. In case the members have not yet opened such an account, they can do so by filling up the requisite application form. For delivering the securities in NSDL depository, members are required to give Irreversible Delivery Out instruction slips (IDO) in their DP. The IDO slips need to be filled with appropriate details about the security, ISIN, Quantity and the Settlement number. Members are also required to create an EPN file as per format given in notice no. 20 dated available on website and upload the same via extranet. Both the Depositories periodically update the Clearing Corporation about the receipt of the securities delivered in early Pay-in by each Clearing Member, in the respective settlement numbers. This information is mapped against the receipt of the data through the EPN files uploaded by the Clearing Members. Accordingly, the margin exemptions are provided to members as soon as the records are uploaded in the RTRMS. Members can view the details of such uploaded records in the RTRMS system, under Reports/Client Position module. Members can do the early pay-in, either before or after their sale trade. In case of preearly pay-in, members are not provided with any additional benefit in their collaterals, but their Margins do not get blocked whenever the sale trade is received for the said scrip and quantity and for the Client mentioned in the EPN file. In case the early Payin is made after the trade is completed then all the blocked margins of the Member for the said trade are released. Members can also view, in the Collateral Module the status of the early pay-in done by them. 69

70 File Format for Early Pay-In of Securities with client codes to be uploaded by the Members through Extranet File naming convention : Exxxxyyyzz.EPN E -- Early Pay-In file identification xxxx -- Clearing No. yyy -- Settlement No zz -- incremental no. starting with 01 For each settlement no. EPN -- Early pay-in File extension Description Type Size Clg. No. Num 4 eg 0102 FinYear Num 4 eg SettleNo Num 4 eg ScripCode Num 6 eg ClientCode Char 11 the code of the Clg. Members client Quantity Num 7 Zero padded The total record length should be 36 The file should be uploaded by the members through the Extranet. The members should ensure that the details are entered correctly and the file is in the specified format. Also the incremental number (zz) should be checked thoroughly before uploading or else previous file of the member may be overwritten. The details in the file will be matched against the transaction files received from CDSL and NSDL. Only the matched records will be uploaded for Early Pay-In. Members may use their own software / back office program to generate the early pay in data file with the required format and naming convention as explained above. (Please refer to Notice no : , dated Thursday, May 26, 2005 for further details) 70

71 Annexure XV Norms for imposing fines/penalties on Clearing Members in case of de-activation of trading terminals Description For de-activation of Trading Terminals due to non-availability of Total Liquid Assets (collateral) during trading session. No. of instances in a calendar month 1 st instance : 2 nd to to 5 th instance : 6 th to 15 th instance : 16 th instance onwards : 0.07% per day Fines/penalties ( Rs. ) Rs. 5,000/- per instance from 2 nd to 5 th instance. Rs. 10,000/- per instance from 6 th to 15 th instance Rs. 10,000/- per instance from 16 th instance onwards. Additionally, the member will be referred to the Disciplinary Action Committee for suitable action. * The instances as mentioned above refer to all de-activation/risk Reduction Mode of trading terminals during market hours in a calendar month. 71

72 Annexure XVI List of Clearing Banks S. No. List of designated Clearing Banks 1 Axis Bank Limited 2 Bank of Baroda 3 Bank of India 4 Canara Bank 5 Central Bank of India 6 Citibank N.A. 7 Corporation Bank 8 Deutsche Bank AG 9 HDFC Bank Limited 10 Hongkong and Shanghai Banking Corporation Limited 11 ICICI Bank Limited 12 IDBI Bank Limited 13 Indian Overseas Bank 14 IndusInd Bank Limited 15 Kotak Mahindra Bank Limited 16 Punjab National Bank 17 Standard Chartered Bank 18 State Bank of India 19 Union Bank of India 20 Yes Bank Limited 72

73 Annexure XVII Format of authorization letter to clearing bank for debiting settlement account Date: To, Name of the Clearing Bank Address of the Clearing Bank Dear Sir, Sub: Authority Letter for debiting our Account No: by Indian Clearing Corporation Ltd. towards settlement, margin or other charges. With reference to the our Account No. which has been opened in your bank in our name, we hereby authorise you to debit the same towards settlement, margin or other charges which ICCL shall submit to you from time to time. In the event of any wrong debit made by the bank on the basis of the bills submitted by ICCL, we shall bring the same to the notice of ICCL and any adjustment to be made shall be at ICCL's end only. We further declare that the bank would not be held responsible in any manner whatsoever for debiting our current account from time to time on the advice of ICCL. Thanking you, Yours faithfully, For Clearing Members Name Clg No. Name of the Official Designation NOTE: (Submit acknowledged copy given by bank to ICCL) 73

74 Annexure XVIII Norms for imposing late fees/fines/penalties on members for non-fulfilment of funds obligations Violation/s Shortage Amount Late Fees/fines/penalty Non-fulfillment of funds a) If such funds 0.07% per day of the shortage obligations (viz. normal obligation amount is more amount, and the trading facility of pay-in, securities shortage than the Base Minimum such member will be withdrawn pay-in and auction pay-in) and for failure to deposit additional capital towards Capital (BMC) (at present Rs.10 lakhs) : (Trading terminals will be deactivated/put on Risk Reducing Mode) and the member s securities capital cushion pay-out to be withheld. requirement as per b) If such funds SEBI/Exchange/ICCL norms within stipulated time. obligation amount is less than the Base Minimum Capital (at present Rs. 10 lakhs) : 0.07% per day of the shortage amount and, in cases where the amount of shortage exceeds 20% of the BMC on 6 occasions within a period of three months, then also the trading facility of the member to be withdrawn (Trading terminals will be de-activated/put on Risk Reducing Mode) and the securities pay-out due to the member will be withheld. The member will be permitted to trade upon recovery of the complete shortages of funds and subject to the member providing a deposit equivalent to his cumulative funds shortage as the funds shortage collateral. Such deposit will be kept with the Clearing Corporation for a period of ten rolling settlements and released thereafter. Such deposit will not available against margin liabilities and also such deposit will not earn any interest. Such deposit can be placed with ICCL by member brokers by way of cash, bank fixed deposit receipts or bank guarantee. 74

75 Annexure XIX Format of letter from Clearing Member regarding shifting settlement account from one designated Clearing Bank to another Date : Manager, Indian Clearing Corporation Ltd. (ICCL) Phiroze Jeejeebhoy Towers Dalal Street, Fort Mumbai Dear Sir, Re : Change of Designated Bank for Clearing & Settlement Purpose. I/We Clg.No. is/ are having A/c. No. with Bank for margins /clearing & settlement obligations. I/We wish to shift my / our designated bank from to bank. Our Account No. with bank is and we wish to designate the same for Clearing & Settlement purpose including margin payments. I/We agree that the operations in the abovementioned account would start only after receiving intimation regarding the same from the Clearing & Settlement Department. You are requested to please do the needful. Signature & Stamp of the Member(s) / Director(s) 75