Direct Market Access – Clarification

Posted: 10/08/2012 in Circulars, SEBI
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CIRCULAR, CIR/MRD/DP/ 20 /2012, dated August 02, 2012

The Managing Director and CEO,

Bombay Stock Exchange Limited,

Phiroze Jeejeebhoy Towers,

Dalal Street,

Mumbai – 400001.

The Managing Director,

National Stock Exchange of India Ltd.,

Exchange Plaza, Bandra Kurla Complex,

Bandra (E),

Mumbai – 400 051.

1. SEBI, vide circular no. MRD/DoP/SE/Cir-7/2008 dated April 03, 2008 introduced Direct Market Access (hereinafter referred to as “DMA”). Further, SEBI vide circular no. MRD/DoP/SE/Cir-03/2009 dated February 20, 2009 permitted institutional investors to use DMA through the Investment Managers.

2. In light of the feedback received from the market participants and the several measures prescribed by SEBI to simplify and rationalize the “Trading Account Opening Process”, the abovementioned SEBI circulars on DMA stands modified to the following extent:

a. The facility of DMA provided by the stock broker shall be used by the client or an investment manager of the client. A SEBI registered entity shall be permitted to act as an investment manager on behalf of institutional clients. In case the facility of DMA is used by the client through an investment manager, the investment manager may execute the necessary documents on behalf of the client(s).

b. The point 3 on Client Authorization and Broker Client Agreement of the SEBI circular no. MRD/DoP/SE/Cir-7/2008 dated April 03, 2008 shall be deleted.

c. In order to bring uniformity on the requirement of documentation for trading account opening process, in view of the SEBI circular no CIR/MIRSD/16/2011 dated August 22, 2011, the specific Broker – Client Agreement for the purpose of DMA shall be replaced with the “Terms and Condition” document as specified at Annexure I. The “Terms and Conditions” shall be provided to the client or investment manager acting on behalf of a client (s) for availing the DMA facility. In case the DMA facility provided by the stock broker is used by the client the paragraphs one to eighteen of Part A of Annexure-I shall be applicable. In case the DMA facility provided by the stock broker is used by the client through an investment manager the paragraphs one to eighteen of Part B of Annexure-I shall be applicable and additionally, the investment manager shall provide to the stock broker the details as specified at Annexure-II.

d. Exchange shall specify from time to time the categories of investors to whom the DMA facility can be extended. Currently, this facility is available for institutional clients. Brokers shall specifically authorize clients or investment managers acting on behalf of clients for providing DMA facility, after fulfilling Know Your Client requirements and carrying out necessary due diligence. The broker shall maintain proper records of such due diligence.

e. The para 2 (a) and 2 (b) of SEBI circular no MRD/DoP/SE/Cir-03/2009 dated February 20, 2009 shall be deleted.

f. The other provision specified in SEBI circular no MRD/DoP/SE/Cir-7/2008 dated April 03, 2008 and SEBI circular no. MRD/DoP/SE/Cir-03/2009 dated February 20, 2009 shall remain applicable.

3. Stock Exchanges are advised to:

a. take necessary steps and put in place necessary systems for implementation of the above.

b. make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the above decision.

c. bring the provisions of this circular to the notice of the member of the stock exchange and also to disseminate the same on the website.

d. communicate to SEBI, the status of implementation of the provisions of this circular in the Monthly Development Report.

4. This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

Harini Balaji

Deputy General Manager

022-26449372

harinib@sebi.gov.in

 

1) Annexure – I: Terms and Conditions

2) Annexure – II: Format for details of investment manager and client.

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Click here to download the complete text of the above Circular in PDF Format- Direct Market Access – Clarification- Aug 02, 2012.

Source: Securities and Exchange Board of India.

 

 

 

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