SEBI’s Master Circular for Stock Exchanges and Clearing Corporations

Narendra Kumar

17 Oct, 2023

The Securities and Exchange Board of India (SEBI), established in 1988, is the regulator for the securities market in India. Its primary function is to protect the interests of investors in securities and to promote the development of the securities market. SEBI’s directives serve as guidelines to stock exchanges, clearing corporations, and other market participants to ensure transparency, integrity, and stability in the financial markets.

On October 16, 2023, SEBI issued a Master Circular with reference number SEBI/HO/MRD2/PoD-2/CIR/P/2023/171, which consolidates various circulars and directions given by SEBI up to August 31, 2023. This article delves into the nuances of this Master Circular and its implications for stock exchanges and clearing corporations.

Purpose of the Master Circular

SEBI has, from time to time, disseminated numerous circulars and directions to stock exchanges and clearing corporations. The core purpose of issuing this Master Circular is to:

1. Provide a centralized document that consolidates all relevant circulars and communications, making it easier for stakeholders to reference and adhere to directives.
2. Update any references to statutes or regulations which have been repealed or replaced, ensuring the circular reflects the most current regulatory environment.
3. Rescind specific older circulars and communications, as listed in Schedule I, that might have become redundant or have been incorporated into the new directives.

Key Features of the Master Circular

1. Effective Date: This Master Circular is effective from the date of its issue, i.e., October 16, 2023.

2. Rescission of Older Circulars: While the Master Circular replaces certain older circulars and communications, actions taken under these older circulars remain valid. This includes:

• Registrations or approvals granted under the rescinded circulars.
• Fees previously collected.
• Any initiated inspections, investigations, adjudications, or issued show-cause notices.
• Applications submitted to SEBI under the rescinded circulars will be considered under the Master Circular’s provisions.

3. Definition Clauses: The circular provides that words and phrases not specifically defined in the document should be interpreted as they are in the Securities Contracts (Regulation) Act, 1956, the SEBI Act, 1992, the Depositories Act, 1996, and related regulations.

4. Supersession: This Master Circular supersedes the earlier Master Circular with reference SEBI/HO/MRD2/DDAP/CIR/P/2021/18 dated July 05, 2021.

5. Accessibility: The Master Circular is publicly accessible on SEBI’s official website.

Content of the Master Circular

The Master Circular, as indicated by its enclosures, covers a comprehensive array of topics related to trading, technology, settlements, risk management, derivatives, and administration. A brief overview of each chapter is as follows:

Chapter 1: Trading
This section covers norms, guidelines, and best practices related to trading activities on stock exchanges.

Chapter 2: Trading Software and Technology
This chapter dives into the technical specifications, guidelines, and regulations concerning trading software and related technologies used by stock exchanges and their members.

Chapter 3: Settlement
Here, guidelines and protocols for the settlement of trades on stock exchanges and the role of clearing corporations are elaborated.

Chapter 4: Comprehensive Risk Management for Cash Market and Debt Segment
This section elucidates the risk management measures and protocols for the cash market and debt segment.

Chapter 5: Exchange Traded Derivatives
This chapter provides an overview of the regulations and guidelines related to derivatives traded on stock exchanges.

Chapter 6: Administration of Stock Exchanges and Clearing Corporation
This section delves into the administrative norms, governance structures, and other regulatory aspects of stock exchanges and clearing corporations.

Schedule I
This section lists all the circulars and communications that have been rescinded with the issuance of this Master Circular.

Conclusion

SEBI’s new Master Circular is a commendable initiative to centralize and streamline regulatory directives for stock exchanges and clearing corporations. By consolidating numerous circulars into one comprehensive document, SEBI not only ensures easier access to relevant regulations but also simplifies compliance for stock exchanges and clearing corporations. This Master Circular is a testament to SEBI’s continuous efforts to enhance transparency and efficiency in India’s securities market.