NATIONAL STOCK EXCHANGE OF INDIA LIMITED

RULES
ARRANGEMENT OF CHAPTERS
Chapter

Description

I.

Board

II.

Executive Committee

III.

Trading Membership

IV.

Disciplinary Proceeding, Penalties

Suspension and Expulsion

National Stock Exchange of India Limited

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I. BOARD
(1)

The Board of Directors (herein referred to as Board) of National Stock Exchange

of India Limited, constituted in accordance with the provisions of the Articles of
Association of the Company, may organise, maintain, control, manage, regulate
and facilitate the operations of the Exchange and of securities transactions by
trading members of the Exchange, subject to the provisions of the Securities
Contracts (Regulation) Act, 1956 and Rules thereunder, Securities and Exchange
Board of India Act, 1992 and any directives thereunder and the trading
regulations which RBI may prescribe from time to time for money market
instruments.

(2)

Directors of the National Stock Exchange of India Limited shall be appointed in

accordance with the provisions of the Articles of Association of the Company as
amended from time to time and in particular, provisions of Articles 108, 109, 110,
111, 112, 113, 114, 115 and 116 thereof. Any such appointment of Directors shall
be considered as one being made under the provisions of these rules.

(3)

Subject to the provisions of the Securities Contracts (Regulation) Act, 1956 and
Rules thereunder, the Securities and Exchange Board of India Act, 1992 and any
directives thereunder and the trading regulations which RBI may prescribe from
time to time for money market instruments, the Board is empowered to make Bye
Laws, Rules and Regulations from time to time, for all or any matters relating to
the conduct of business of the Exchange, the business and transactions of trading
members between trading members inter-se as well as the business and
transactions between trading members and persons who are not trading members,
and to control, define and regulate all such transactions and dealings and to do
such acts and things which are necessary for the purposes of the Exchange.

(3A)

The composition of the Board shall consist of the following categories namely
Public Interest Directors, Trading Member Directors, Shareholder Directors and
SEBI may nominate Directors on the Board as and when deemed fit. The Chief
Executive shall be an ex-officio Director on the Board.

(3B)

(1) Board Composition

The composition of the Board shall be as under:
(a)

Public Interest Directors (PIDs) shall constitute one-fourth of the total

strength of the Board.

(b) Trading Member Directors shall constitute a maximum of one-fourth of the

total strength of the Board.
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(c)

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Shareholder Directors shall constitute the balance of the Board.

In case SEBI nominates Directors on the Board of NSE, then the SEBI
Nominee Director shall be duly absorbed on the Board by appropriately
readjusting/altering the strength of Trading Member Directors than
Shareholder Directors.

(2) General Requirements

(a)

The Directors except the Public Interest Directors and the Chief Executive
such as Chief Executive Officer, Executive Director, Managing Director,
etc. shall be elected by the Shareholders.

(b) No director shall hold office for more than two consecutive terms.
(c) Trading Member Directors shall be elected from amongst the Trading
Members.
(d) Shareholder Directors shall be elected from amongst the Persons, who are
not Trading Members or Associates of Trading Members.
Associate in relation to a Trading Member, individual, body corporate or
firm, shall include a person(i) who, directly or indirectly, by himself or in combination with other
persons, exercises control over the Trading Member, whether
individual, body corporate or firm or holds substantial share of not less
than 15% in the capital of such entities, or
(ii) in respect of whom the Trading Member, individual or body corporate
or firm, directly or indirectly, by itself or in combination with other
persons, exercises control, or
(iii) whose director or partner is also a director or partner of the Trading
Member, body corporate or the firm, as the case may be.
The expression control shall have the same meaning as defined under
clause (c) of Regulation 2 of the SEBI (Substantial Acquisition of Shares
and Takeovers) Regulations, 1997.
(e) Public Interest Directors shall be selected by the Board from amongst the
Persons in the SEBI constituted panel. A person shall not act as Public
Interest Director on more than one Stock Exchange simultaneously.

National Stock Exchange of India Limited

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(f)

The Chairman shall be elected by the Board from amongst the

non-executive non trading member directors. If, for some reason, it is not
possible for the Board to elect a Chairman, the Board may elect a Chairman
for every meeting of the Board from amongst the non-executive non-trading
member directors of the Board.

(g)

The manner of election, appointment, tenure, resignation, vacation, etc. of

Directors (except the Chief Executive) shall be governed by the Companies
Act, 1956 save as otherwise specifically provided under or in accordance
with the Securities Contracts (Regulation) Act, 1956.

(h)

The Chief Executive shall be an ex-officio Director on the Board.

(i)

No approval of SEBI shall be required for appointment of any Director,

except for the Chief Executive.

(j)

SEBI may nominate Directors on the Board as and when deemed fit.

(3) Chief Executive

The appointment, renewal of appointment and the termination of service of the
Chief Executive shall be subject to prior approval of SEBI. However, the
Exchange shall determine the manner of selection, terms and conditions of
appointment and other procedural formalities associated with the
selection/appointment of the Chief Executive. The Exchange shall carry out
necessary due diligence with respect to the verification of antecedents, credentials
and experience of the proposed person as Chief Executive. The Exchange shall
constitute a Committee for the selection of Chief Executive. The Committee shall
generally consist of four persons, one representative from the exchange, two
outside experts and one Public Interest Director. However, constitution of the said
Committee shall not require SEBI approval.
(3C)

Criteria to become a Director on the Board of NSEIL

(1) The person should be a fit and proper person and for deciding such person is a
fit and proper person, the Board of NSEIL may take account of any consideration as
it deems fit including but not limited to the following criteria:(a)
(b)
(c)
(d)
(e)
(f)

financial integrity;
absence of convictions or civil liabilities;
competence;
good reputation and character;
efficiency and honesty; and
absence of any disqualification as mentioned in subrule (2) of this Rule.

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(2) A person shall not be considered as a fit and proper person to become a Director
on the Board of NSEIL if he incurs any of the following disqualifications:(a)

if he has been convicted by a Court for any offence involving moral

turpitude, economic offence, securities laws or fraud;

(b)

if he has been declared insolvent and has not been discharged;

(c)

an order, other than an order of suspension of registration as an intermediary,

restraining, prohibiting or debarring him from dealing in securities in the
capital market or from accessing the capital market, has been passed by SEBI
or any other regulatory authority and a period of three years from the date of
the expiry of the period specified in the order has not elapsed;

(d)

an order canceling his certificate of registration has been passed by SEBI on

the ground of his indulging in insider trading, fraudulent and unfair trade
practices or market manipulation and a period of three years from the date of
the order has not elapsed;

(e)

an order withdrawing or refusing to grant any license /approval to him which

has a bearing on the Capital Market, has been passed by SEBI or any other
regulatory authority and a period of three years from the date of the order has
not elapsed;

(f)

he is financially not sound;

(g)

any other reason which in the opinion of the SEBI renders such person unfit
to operate in the capital market.

(3D)

The elected directors shall not interfere in the day to day management of the
Exchange, particularly relating to the surveillance and risk management functions.

(3E)

Besides the Board, it shall be the duty of the Chief Executive to give effect to the
directives, guidelines and other orders issued by SEBI in order to implement the
applicable provisions of law, rules, regulations as also the Rules or the Articles of
Association, Regulations and Byelaws of the stock exchange. Any failure in this
regard will make him liable for removal or termination of services by the Exchange
with the prior approval of SEBI or on receipt of direction to that effect from SEBI,
subject to the concerned Chief Executive being given an opportunity of being heard
against such termination.

National Stock Exchange of India Limited

(4)

Without prejudice to the generality of the foregoing, the Board is empowered to

make Regulations, subject to the provisions of the Securities Contracts (Regulation) Act, 1956 and Rules thereunder, the Securities and Exchange Board of India
Act, 1992 and any directives thereunder and the trading regulations which RBI
may prescribe from time to time for money market instruments, for all or any of
the following matters:
(a)
(b)

(5)

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Conditions for admission to membership of the Exchange;

Conditions for any arrangement with another stock exchange pursuant to the
proviso to Section 13 of the Securities Contracts (Regulation) Act, 1956
and all matters relating thereto

(c)

Conduct of business of the Exchange;

(d)

Conduct of trading members with regard to the business of the Exchange;

(e)

Penalties for disobedience or contravention of the Rules, Bye Laws and

Regulations of the Exchange or of general discipline of the Exchange,
including expulsion or suspension of the trading members;

(f)

Declaration of any trading member as a defaulter or suspension or

resignation or expulsion from trading membership of the Exchange and
consequences thereof;

(g)

Conditions, levy for admission or subscription for admission or

continuance of trading membership of the Exchange;

(h)

Charges payable by trading members for transactions in such securities as

may be laid down from time to time;

(i)

Investigation of the financial condition, business conduct and dealings of

the trading members;

(j)

Appointment of Committee or Committees for any purpose of the

Exchange;

(k)

Such other matters in relation to the Exchange as may be prescribed under

the provisions of the Articles of Association, Bye Laws or these Rules or
as may be necessary or expedient for the organisation, maintenance,
control, management, regulation and facilitation of the operations of the
Exchange.

The Board is empowered to delegate, from time to time, to the Executive

Committee(s) or to the Managing Director or to any person, such of the powers
vested in it and upon such terms as they may think fit, to manage all or any of the
affairs of the Exchange and from time to time, to revoke, withdraw, alter or vary
all or any of such powers.

National Stock Exchange of India Limited

(6)

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The Board may, from time to time, constitute one or more committees comprising
of members of the Board or such others as the Board may in its discretion deem
fit or necessary and delegate to such committees such powers as the Board may
deem fit and the Board may from time to time revoke such delegation. The
Committees constituted by the Board may inter alia include :
(a)

Admissions Committee for admission of trading members of the

Exchange;

(b)

Infrastructure Committee to recommend appropriate infrastructure and

implement the same;

(c)

Systems Committee to recommend setting up of systems for carrying on

the functioning of the Exchange and to implement and monitor the same;

(d)

Any other matter which the Board may think fit.

(7)

The Board shall have the authority to issue directives from time to time to the
Executive Committee or any other Committees or any other person or persons to
whom any powers have been delegated by the Board. Such directives issued in
exercise of this power, which may be of policy nature or may include directives to
dispose off a particular matter or issue, shall be binding on the concerned
Committee(s) or person(s).

(8)

Subject to the provisions of the Securities Contracts (Regulation) Act, 1956 and
Rules thereunder, the Securities and Exchange Board of India Act, 1992 and any
directives thereunder and the trading regulations which RBI may prescribe from
time to time for money market instruments, the Board is empowered to vary,
amend, repeal or add to Bye Laws, Rules and Regulations framed by it.

(9)

The Members of the Board and of such committees as may be identified by the
Ethics Committee shall adhere to the Code of Conduct as may be prescribed by
the Board or Ethics Committee from time to time.

National Stock Exchange of India Limited

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Code of conduct for the Directors on the Board

(10) (A) Meetings & minutes
The Directors shall(a)

not participate in the discussion on any subject matter in which any conflict
of interest exists or arises, whether pecuniary or otherwise, and in such cases
the same shall be disclosed and recorded in the minutes of the meeting;

(b)

not encourage the circulation of agenda papers during the meeting, unless
circumstances so require;

(c)

offer their comments on the draft minutes and ensure that the same are
incorporated in the final minutes;

(d)

insist on the minutes of the previous meeting being placed for approval in
subsequent meeting;

(e)

endeavour to have the date of next meeting fixed at each Board Meeting in
consultation with other members of the Board; and

(f)

endeavour that in case all the items of the agenda of a meeting were not
covered for want of time, the next meeting is held within 15 days for
considering the remaining items.

(B) Strategic Planning

The Directors shall(a)

participate in the formulation and execution of strategies in the best interest

of the exchange and contribute towards pro-active decision making at the
Board level; and

(b)

give benefit of their experience and expertise to the Exchange and provide
assistance in strategic planning and execution of decisions.

(C) Regulatory Compliances

The Directors shall(a)

endeavour to ensure that the Exchange abides by all the provisions of the
SEBI Act, 1992, Securities Contracts (Regulation) Act, 1956, Rules,
Regulations framed thereunder and the circulars, directions issued by the
Government / SEBI, from time to time;

National Stock Exchange of India Limited

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(b)

endeavour compliance at all levels so that the regulatory system does not
suffer any breaches;

(c)

endeavour to ensure that the Exchange takes commensurate steps to honour

the time limit prescribed by SEBI for corrective action; and

(d)

not support any decision in the meeting of the Board which may adversely
affect the interest of investors and shall report forthwith any such decision to
SEBI.

(D)

General Responsibility

The Directors shall(a)

place priority for redressing Investor Grievances and encourage fair trade
practice, so that the Exchange becomes an engine for the growth of the
securities market;

(b)

endeavour to analyse and administer the exchange issues with professional

competence, fairness, impartiality, efficiency and effectiveness;

(c)

submit the necessary disclosures/ statement of holdings/dealings in securities

as required by the Exchange from time to time as per their Rules or Articles
of Association;

(d)

unless otherwise required by law, maintain confidentiality and shall not

divulge/ disclose any information obtained in the discharge of their duty.
Further, no such information shall be used for personal gains;

(e)

maintain the highest standards of personal integrity, truthfulness, honesty

and fortitude in discharge of their duties in order to inspire public confidence
and shall not engage in acts discreditable to their responsibilities;

(f)

perform their duties in an independent and objective manner and avoid

activities that may impair, or may appear to impair, their independence or
objectivity or official duties;

(g)

perform their duties with a positive attitude and constructively support open
communication, creativity, dedication and compassion;

(h)

not engage in any act involving moral turpitude, dishonesty, fraud, deceit or
misrepresentation or any other act prejudicial to the administration of the
Exchange.

National Stock Exchange of India Limited

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II. EXECUTIVE COMMITTEE

Constitution
(1)

One or more Executive Committee(s) shall be appointed by the Board for the
purposes of managing the day to day affairs of the different trading segment(s).

(2)

Executive Committee(s) appointed by the Board shall consist of:

(a)

Managing Director of the Company,

(b)

[deleted]

(c)

Not more than four trading members as may be nominated by the Board as
per Rules laid down in this regard,

(d)

Such individual persons of eminence in the field of finance, accounting,

law or other discipline and to be known as public representatives as may
be nominated by the Board.

(e)

Four persons nominated in that behalf by the Board, to be known as other

nominees, which may include two ex-officio senior officers of the
Company.
The maximum strength of the Executive Committee shall be 15.

(3)

The Managing Director of the Company shall be the Chief Executive of the
Exchange.

(3A)

Notwithstanding anything contained herein, the SEBI circulars or directives

dealing with the constitution, composition of the Executive Committee(s) of the
Futures & Options segment and/or Currency Derivatives segment shall be
complied with.

Powers of Executive Committee

(4)

The Board may delegate from time to time to the Executive Committee(s) such of
the powers vested in it and upon such terms as it may think fit, to manage all or
any of the affairs of the Exchange and from time to time, to revoke, withdraw,
alter or vary all or any of such powers.

(5)

The Executive Committee of each trading segment shall have such responsibilities
and powers as may be delegated to it by the Board from time to time which may,
inter alia, include the following responsibilities and powers to be discharged in
accordance with the provisions of the Bye Laws and Rules :

National Stock Exchange of India Limited

(6)

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(a)

approving securities for admission to the relevant Official List for NSE
securities;

(b)

admitting trading members;

(c)

approving, in the case of capital market trading segment, market-makers to

act as such;

(d)

supervising the market and promulgating such Business Rules and Codes
of Conduct as it may deem fit;

(e)

determining from time to time, fees, deposits, margins and other monies
payable to the NSE by trading members and Companies whose securities
are admitted/to be admitted to the Official List and the scale of brokerage
chargeable by trading members;

(f)

prescribing, from time to time, capital adequacy and other norms which
shall be required to maintained by trading members;

(g)

prescribing, from time to time, and administering and effecting penalties,

fines and other consequences, including suspension/expulsion for defaults
or violation of any requirements of the Bye-laws and Regulations and the
Rules and Codes of Conduct and criteria for readmission, if any,
promulgated thereunder;

(h)

administering, maintaining and investment of the corpus of the Fund(s) set

up by the Exchange including Investor Protection Fund;

(i)

norms, procedures and other matters relating to arbitration;

(j)

power to take disciplinary action/proceed legally against any trading

member;

(k)

dissemination of information, announcements to be placed on the trading

system;

(l)

listing requirements and conditions to be complied with;

(m)

listing fees payable by the company whose securities are admitted to

dealings on the Exchange;

(n)

continuance of listed status of the company whose securities are admitted

to dealings on the Exchange;

(o)

any other matter delegated by the Board.

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

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(7)

The Executive Committee may from time to time, authorise the Managing
Director or such other person(s) to carry out such acts, deeds and functions in
accordance with such provisions as may be laid down in this regard for fulfilling
the responsibilities and discharging the powers delegated to it by the Board.

(8)

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

Government/SEBI Representative
(9)

The Government and SEBI shall nominate on the Executive Committee from time
to time, not more than one person each to be referred to as Government
Nominee.

(10)

Any vacancy caused by resignation, withdrawal of nomination, death or otherwise

of such a nominated Government Representative shall be filled in by a similarly
nominated person.

Trading Members
(11)

Subject to provisions of Rules 18 and 19 herein, the Board shall nominate on the
Executive Committee from time to time not more than four trading members. The
persons so nominated shall hold office for a period of one year and shall be
eligible for renomination.

(12)

Any vacancy caused by resignation, removal, death or otherwise of such a

nominated person shall be filled in by a similarly nominated person.

Public Representatives
(13)

The Board shall nominate on the Executive Committee from time to time not
more than four persons referred to as Public Representatives who are individual
persons of eminence in the field of finance, accounting, law or other discipline.
The persons so nominated shall hold office for a period of one year and shall be
eligible for renomination.

(14)

Any vacancy caused by resignation, removal, death or otherwise of such a

nominated Public Representative shall be filled in by a similarly nominated
person.

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Other Nominees
(15)

The Board shall nominate on the Executive Committee from time to time not
more than four persons referred to as Other nominees. These may include two
senior officers of the Company. The persons so nominated shall hold office for a
period of one year and shall be eligible for renomination.

(16)

Any vacancy caused by resignation, removal, death or otherwise of such a

nominated person shall be filled in by a similarly nominated person.

Vacation of Office of Nominees of the Board

(17)

The office of nominees of the Board including that of the public representatives,
trading members and other nominees on the Executive Committee shall ipso facto
be vacated if:
(a)

he is adjudicated insolvent;

(b)

he applied to be adjudicated insolvent;

(c)

he is convicted by any Court in India of any offence and sentenced in

respect thereof to imprisonment for not less than 30 days;

(d)

he absents himself from three consecutive meetings of the Executive

Committee or for a continuous period of three months whichever is longer
without obtaining leave of absence from the Committee meeting;

(e)

in the case of a trading member, if he ceases to be a trading member of the

Exchange or if he, by notice in writing addressed to the Executive
Committee, resigns his office or if he is suspended or expelled or if his
membership is terminated;

Provided however that if at any time the Board is satisfied that circumstances
exist which render it necessary in public interest to do so, the Board may revoke
the nomination of any such person.
Eligibility of Trading Member to become Executive Committee member
(18)

No trading member shall be eligible to be nominated as a member of an Executive

Committee:(a)

unless he satisfies the requirement, if any, prescribed in that behalf by the

Rules framed under the Securities Contracts (Regulation) Act, 1956 and
the Securities and Exchange Board of India Act, 1992;

(b)

unless he is a trading member of the relevant trading segment for such

period as may be decided by the Board from time to time;

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(c)

if he is a partner with a trading member who is already a member of that

Executive Committee;

(d)

if he has at any time been declared as defaulter or failed to meet his

liabilities in ordinary course or compounded with his creditors;

(18A) No trading member shall be eligible to continue or be nominated on the Executive

Committee :-

(19)

(a)

if his certificate of registration as a stock broker has been cancelled by the

Securities and Exchange Board of India or he has been expelled by the
Exchange;

(b)

if his certificate of registration as a stock broker or his trading rights have

been suspended by the Securities and Exchange Board of India or the
Exchange as the case may be or his membership rights have been
suspended by the Exchange on account of any disciplinary action taken
against him under the Rules, Regulations or Byelaws of the Exchange and
two years have not elapsed from the date of expiry of such suspension of
certificate of registration, trading rights or membership rights;

(c)

if he falls in the category of Notified Persons as per the Special Courts

(Trial of Offences Relating to Transaction in Securities) Act, 1992 and
two years have not elapsed from the date the member is denotified under
the said Act.

A trading member nominated for two consecutive years as a member on an

Executive Committee shall not be eligible to be nominated to the Executive
Committee unless a period of two years has elapsed since his last nomination.

Office Bearers of Executive Committee

(20)

The Executive Committee shall from time to time have the following officebearers namely, the Chairman and Vice Chairman.

(21)

The Managing Director of the Company shall be the Chairman of Executive

Committee(s).

(22)

The Executive Committee shall elect one among themselves as the Vice
Chairman.

(23)

The Vice Chairman so elected shall hold office for a period of one year and shall
be eligible for re-election.

(24)

In the event of any casual vacancy arising in the office of the Vice-Chairman due
to death, resignation or any other cause, the Executive Committee shall nominate
a successor from among the members of the Executive Committee.

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(25)

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The persons nominated/elected as above in any casual vacancy shall hold office
for the same period for which the office-bearer in whose place he was appointed
would have held office if it had not been vacated as aforesaid.

Meetings of the Executive Committee

(26)

The Executive Committee may meet at least once in every calendar month for the
despatch of business, adjourn and otherwise regulate its meetings and proceedings
as it thinks fit, and may determine the quorum necessary for the transaction of
business.

(27)

The quorum for a meeting of the Executive Committee, shall be one-third of the
total strength of the Executive Committee, any fraction being rounded off as one,
or three members whichever is higher; provided that where at any time the
number of interested members exceeds two-thirds of the total strength, then the
number of remaining members, i.e., the number of members not interested shall
be the quorum for the meeting.

(28)

The Chairman or Vice-Chairman or any two members of the Executive

Committee may at any time convene a meeting of the Executive Committee.

(29)

Questions arising at any meeting of the Executive Committee shall be decided by

a majority of the votes cast excepting in cases where a larger majority is required
by any provision of the Bye Laws, Rules and Regulations of the Exchange. In the
case of equality of votes on matters which can be decided by a majority of votes,
the Chairman presiding over the meeting shall have a second or casting vote.

(30)

At all meetings of the Executive Committee the Chairman shall ordinarily preside
and in his absence the Vice-Chairman shall preside. If the Vice-Chairman also be
not present at the meeting, the members of the Executive Committee present shall
choose one from among themselves to be Chairman of such meeting.

(31)

Subject to the conditions stated elsewhere every member of the Executive

Committee shall have only one vote whether on a show of hands or on a poll
except that in the case of a poll resulting in equal votes, the Chairman who
presides over the meeting shall have a casting vote.

(32)

No vote by proxy shall be allowed either on a show of hands or on a poll in

respect of any matter.

Chairman and Vice Chairman

(33)

The Chairman may assume and exercise all such powers and perform all such
duties as may be delegated to him by the Executive Committee from time to time
as provided in the Rules, Bye Laws and Regulations of the Exchange.

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(34)

In the absence of the Chairman or on his inability to act, the Vice-Chairman, and
in his absence or inability to act, his functions and powers shall be exercised by
the senior available officer of the Company under the directions of the Executive
Committee.

(35)

The Chairman, and in his absence the Vice-Chairman, shall be entitled to exercise
any or all of the powers exercisable by the Executive Committee whenever he be
of the opinion that immediate action is necessary, subject to such action being
confirmed by the Executive Committee within twenty-four hours.

(36)

The Chairman and/or delegated authority shall represent the Exchange officially
in all public matters.
Provided that the Executive Committee may direct that on any matters or occasion
the Chairman and/or other member or members of the Executive Committee shall
represent the Exchange.

(37)

A meeting of the Executive Committee for the time being, at which a quorum is
present shall be competent to exercise all or any of the authorities, powers and
discretion for the time being vested in or exercisable by the Executive Committee
generally.

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III. TRADING MEMBERSHIP

(1)

The rights and privileges of a trading member shall be subject to the Bye Laws,
Rules and Regulations of the Exchange.

(2)

All trading members of the Exchange shall have to register themselves prior to
commencing operations on the Exchange, with the Securities and Exchange
Board of India.

Eligibility
(3)
The following persons shall be eligible to become trading members of the
Exchange:

(4)

(a)

individuals

(b)

registered firms

(c)

bodies corporate

(d)

companies as defined in the Companies Act, 1956 and

(e)

such other persons or entities as may be permitted under the Securities

Contracts (Regulation) Rules, 1957 as amended from time to time.

No person shall be admitted as a trading member of the Exchange if such

proposed member:
(a)

is an individual who has not completed 21 years of age;

(b)

is an individual who is engaged as a principal or employer in any business

other than that of securities except as a broker or agent not involving any
personal financial liability unless he undertakes on admission to severe his
connection with such business;

(c)

is a body corporate who has committed any act which renders the person
liable to be wound up under the provisions of the law;

(d)

is a body corporate who has had a provisional liquidator or receiver or

official liquidator appointed to the person;

(e)

has been adjudged bankrupt or a receiving order in bankruptcy has been

made against the person or the person has been proved to be insolvent
even though he has obtained his final discharge;

(f)

has been convicted of an offence involving a fraud or dishonesty;

(g)

has compounded with his creditors for less than full discharge of debts;

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(5)

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(h)

has been at any time expelled or declared a defaulter by any other Stock
Exchange;

(i)

has been previously refused admission to membership unless the period of

one year has elapsed since the date of rejection;

(j)

incurs such disqualification under the provisions of the Securities

Contracts (Regulation) Act, 1956 or Rules made thereunder as disentitles
such person from seeking membership of a stock exchange.

No individual person shall be eligible for admission to trading membership of the

Exchange unless:
(a)

he has worked for not less than two years as a Partner with, or as an
authorised assistant or authorised clerk or apprentice to a member of any
recognised stock exchange and is duly registered with that Exchange, or

(b)

he agrees to work for a minimum period of two years as a partner or

representative member with another member of the Exchange and to enter
into transactions on the Exchange not in his own name but in the name of
that member under whom he is working; or

(c)

he succeeds to the established business of a deceased or retiring member

of the Exchange who is his father, uncle, brother or any other person who
is in the opinion of the relevant authority, a close relative;

Provided that the relevant authority may waive compliance with any or all of the
foregoing conditions contained in this Rule and at their discretion waive the
requirements set out above, if they are of the opinion that the person seeking is
considered by the relevant authority to be otherwise qualified to be admitted as a
member by reason of his means, position, integrity, knowledge and experience of
business in securities.
(6)

(6A)

No person shall be eligible to be admitted to the trading membership of the

Exchange unless the person satisfies :
(a)

the requirements prescribed in that behalf under the Securities Contracts

(Regulation) Act, 1956, and the Rules framed thereunder and under the
Securities and Exchange Board of India Act, 1992, and

(b)

such additional eligibility criteria as the Board or relevant authority may

prescribe for the different classes of trading members and trading
segments from time to time.

Certification
No person shall be eligible to be admitted to the trading membership of the
Exchange unless he has passed the Certification Programme conducted by the

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Exchange for such Trading segment of the Exchange as it may determine from
time to time.
(7)

Unless otherwise specified by the relevant authority, membership for any person
shall be restricted to only one trading segment.

(8)

Trading member of any trading segment may trade in NSE securities applicable to
that segment.

Admission
(9)

Any person desirous of becoming a trading member shall apply to the Exchange
for admission to the trading membership of the relevant trading segment of the
Exchange. Every applicant shall be dealt with by the relevant authority who shall
be entitled to admit or reject such applications at its discretion.

(10)

The application shall be made in such formats as may be specified by the relevant
authority from time to time for application for admission of trading members to
each trading segment.

(11)

The application shall have to be submitted along with such fees, security deposit
and other monies in such form and in such manner as may be specified by the
relevant authority from time to time.

(12)

The applicant shall have to furnish such declarations as may be specified from
time to time by the relevant authority.

(13)

The relevant authority shall have the right to call upon the applicant to pay such
fees or deposit such additional security in cash or kind, to furnish any additional
guarantee or to require the deposit of any building fund, computerisation fund,
training fund or fee as the relevant authority may prescribe from time to time.

(14)

The relevant authority may admit the applicant to the trading membership of the
Exchange provided that the person satisfies the eligibility conditions and other
procedures and requirements of admission. The relevant authority may at its
absolute discretion reject any application for admission without communicating
the reason thereof.

(15)

If for any reason the application is rejected, the admission fee shall be refunded to
the applicant, without any interest.

(16)

The relevant authority may at any time from the date of admission to the trading
membership of the Exchange cancel the admission and expel a trading member if
he has in or at the time of his application for admission to membership or during
the course of the inquiry made by the relevant authority preceding his admission :
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(a)

made any willful misrepresentation; or

(b)

suppressed any material information required of him as to his character

and antecedents; or

(c)

has directly or indirectly given false particulars or information or made a

false declaration.

(17)

When a person is admitted to the trading membership of the Exchange, intimation

of the persons admission shall be sent to the person and to the Securities and
Exchange Board of India. If the person admitted to the membership of the Exchange and after intimation of his admission is duly sent, does not become a
member by complying with acts and procedures for exercising the privileges of
membership as may be prescribed by the relevant authority within a specified
time period from the date of despatch of the intimation of admission, the
admission fee paid by him shall be forfeited by the Exchange.

(18)

(a)

Every trading member of the Exchange shall, upon being admitted as a

trading member of the Exchange be issued a certificate or entitlement slip
as proof of having been admitted to the benefits and privileges of the
trading membership of the Exchange. Such a certificate or entitlement slip
shall not be transferable or transmittable except as herein mentioned.

(b)

Subject to such terms and conditions as the relevant authority may

prescribe from time to time and to the prior written approval of the
relevant authority, transfer of the certificate / entitlement slip, may be
effected as follows:
(i)
by making nomination under these Rules;
(ii)
by an amalgamation or merger of a trading member company;
(iii)
(iv)
(v)

(c)

by takeover of a trading member company;

by transfer of the trading membership of a trading member firm to
a new firm, in which, all the existing partners are not partners; and
by two or more trading members / trading member firms coming
together to form a new partnership firm/company.

A Trading Member or his successor(s) may make a nomination to the

certificate / entitlement slip of trading membership. The nomination(s)
made by a trading member or successor(s) of a trading member shall be
subject to the following conditions, namely:
(i)
The nominee(s) shall, at the time when the nomination becomes
effective, be person(s) who shall be qualified to be admitted as
trading member(s) of the Exchange;
(ii)
The nominee(s) shall give to the relevant authority his/their
unconditional and irrevocable acceptance of his/their nomination;

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(iii)

A trading member shall nominate one or more of his successor(s)

as per the applicable succession laws. If the trading member has no
successor(s) willing to carry on the trading membership, then, the
trading member may nominate person(s) other than his
successor(s);

(iv)

If the trading member has not nominated any person and is

rendered incompetent to carry on his business on the Exchange on
account of physical disability, then the trading member may,
within a period of six months, make a nomination as per the
provisions of sub-clause (iii) above;
If the trading member has not nominated any person, the
successor(s) of the trading member may nominate one or more
persons from among themselves within six months from the date of
the death of the trading member;

(v)

(vi)

If the nomination of the trading member is such that it cannot be

given effect to by the relevant authority, at the time when the
nomination would have become effective, then the successor(s) of
such a trading member may nominate any other person(s) within
six months from the date on which the nomination would have
become effective;
(vii) If more than one person(s) are nominated by the trading member or
the successor(s), then such nominated person(s) shall be required
to form a company to carry on the trading membership;
(viii) A nomination made by a trading member or successor(s) may be
revoked with the prior written approval of the relevant authority
and subject to such terms and conditions as the relevant authority
may prescribe from time to time. No such revocation shall be
permitted after the nomination becomes effective; and
(ix)
The nomination shall become effective in the case of a nomination
made by a trading member, from the date of his death or physical
disability or from the date of approval by the relevant authority,
whichever is later and in the case of a nomination made by
successor(s), from the date on which such nomination is made or
from the date of approval by the relevant authority, whichever is
later.
(d)

The relevant authority may permit the transfer of the certificate /

entitlement slip in the following circumstances:
(i)
(ii)

Death of a trading member;

If in the opinion of the relevant authority, the trading member is
rendered incompetent to carry on his business on the Exchange on
account of physical disability;
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(iii)
(iv)
(v)

(e)

Rules

Upon amalgamation or merger of a trading member company;

Upon takeover of a trading member company; and
Upon the death of or resignation or notice of dissolution by a
partner of a trading member firm, and re-alignment, if any, by the
partners in such firm or by the partners in such firm and the
nominee(s)/successor(s) of the outgoing partner or by the partners
in such firm and person(s) other than the nominee(s)/successor(s)
of the outgoing partner in a new firm, within a period of six
months from the date of such death or resignation or notice of
dissolution.

The relevant authority may, while permitting the transfer, prescribe from
time to time such transfer fee as it deems fit in the following
circumstances viz.,
(i)
nomination by a trading member of a person other than
successor(s) under the applicable laws;
(ii)

nomination by the successor(s) of a trading member, if the

nominee(s) is/are not from amongst the successors;

(iii)

amalgamation or merger of a trading member company with a non

trading member company resulting in the loss of majority
shareholding and/ or control of management by the majority
shareholders of the trading member company;

(iv)

takeover of the trading member company by non trading

member(s) resulting in the loss of majority shareholding and/ or
control of management by the majority shareholders of the trading
member company; and
in the case of sub-clause (v) of clause (d), if the person(s) other
than the nominee(s)/successor(s) of the outgoing partner hold
atleast 51% of share in the profits & losses of the new firm and /or
atleast 51% of share in the capital of the new firm.

(v)

Explanation I
For the purpose of sub-clauses (iii) and (iv) above, the term loss
of majority shareholding means a shareholder or a group of
shareholders holding 51% or more shares / interest in the trading
member company ceases to hold 51% of shares / interest in the
trading member company or in the amalgamated company which
shall take up trading membership upon amalgamation of the
trading member company with a non trading member company.
Explanation II
For the purpose of sub-clauses (iii) and (iv) above, the term loss
of control in management means the loss of the right to appoint

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majority of the directors or to control the management or policy

decision exercisable by person or persons acting individually or in
concert, directly or indirectly including by virtue of their
shareholding or management rights or shareholders agreements or
voting agreements or in any other manner.
(f)

For the purpose of the clauses (b) to (e), the term trading member shall
to the extent applicable, include a partner of a trading member firm or a
shareholder of a trading member company. The term successor(s) shall to
the extent applicable, include successor(s) of a partner of a trading
member firm or successor(s) of a shareholder of a trading member
company.

(g)

Without prejudice to any other provision of the Rules, the trading

membership may be suspended, for such period as the relevant authority
may deem fit, in the following circumstances:
(i)
Upon the individual trading member or a partner of a trading
member firm or a shareholder of a trading member company, in the
opinion of the relevant authority, being rendered incompetent to
carry on his business on account of physical disability;
(ii)
Upon the mental disability of the individual trading member or a
partner of a trading member firm provided the partner holds atleast
51% of share in the profits & losses of and/or atleast 51% of share
in the capital of such firm or a shareholder of a trading member
company provided the shareholder is a majority shareholder in
such trading member company;
(iii) Upon the death of an individual trading member or a partner of a
trading member firm provided the partner holds atleast 51% of
share in the profits & losses of and / or atleast 51% of share in the
capital of such firm or a shareholder of a trading member
company, provided the shareholder is a majority shareholder in
such trading member company and during the six month period
within which successor(s) of such individual trading member or
partner or shareholder, may nominate person(s) to take up the
stake/ shares of such deceased individual trading member or
partner or shareholder;
(iv)
(v)

Upon the dissolution of a trading member firm and during the six
month period as referred to in sub clause (v) of clause (d); and
Upon any deadlock in the management of a trading member firm
or trading member company, which, in the opinion of the relevant
authority will affect the ability of such trading member firm or
trading member company to carry on its business. The trading
member shall be entitled for an opportunity for representation
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before the relevant authority, before being suspended under this

sub-clause, but the decision of the relevant authority shall be final.
Explanation I
For the purposes of this sub-clause, the term Deadlock in the
Management means a situation wherein there is a loss of
confidence or disagreement among the partners of a trading
member firm or among the directors/shareholders of a trading
member company, which, in the opinion of the relevant authority,
will affect or is likely to affect the conduct of business by the
trading member firm or trading member company, as the case may
be or an equality of vote at a meeting of the directors or
shareholders of a trading member company.
(h)

Without prejudice to any other provision of the Rules, the trading

membership may be terminated by the relevant authority if an acceptable
nomination or realignment, as the case may be, does not take place to the
satisfaction of the relevant authority, within the said period of six months.

(i)

The nominee(s), successor(s), partners of a trading member firm or such

other persons, as the case may be shall be entitled for an opportunity for
representation before the relevant authority, before being terminated under
clause (h) above, but the decision of the relevant authority shall be final.

Conversion of legal status of the trading member.

(j)

Subject to such terms and conditions as the relevant authority may

prescribe from time to time and to the prior written approval of the
relevant authority, conversion of the legal status of a trading member may
be effected as follows:
(i)
by conversion of an individual trading member into a partnership
firm / company;
(ii)
by conversion of a Trading Member firm into a company.

(k)

The relevant authority may permit the conversion of the legal status of the
trading member in the following circumstances:
(i)
In the case of sub-clause (i) of clause (j), if the individual trading
member holds and continues to hold atleast 51% of the share in the
profits/losses and/or atleast 51% of share in the capital of the
partnership firm, or atleast 51% of shareholding / interest in the
company, which shall take up the trading membership of the
Exchange.
(ii)
In the case of sub-clause (ii) of clause (j), if the partners holding
atleast 51% of share in the profits / losses and /or atleast 51% of
share in the capital of the trading member firm hold and continue

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to hold atleast 51% of shareholding / interest in the company

which shall take up the trading membership of the Exchange.
(19)

The entitlement slip does not confer any ownership right as a member of the
Company. The original of the entitlement slip shall stand deposited with the
relevant authority. An authenticated photocopy or duplicate of such entitlement
slip shall remain in the possession of the trading member as a proof of the trading
membership of the Exchange.

(20)

A trading member shall not assign, mortgage, pledge , hypothecate or charge his
right of membership or any rights or privileges attached thereto and no such
attempted assignment mortgage, pledge, hypothecation or charge shall be
effective as against the Exchange for any purpose, nor shall any right or interest in
any trading membership other than the personal right or interest of the trading
member therein be recognised by the Exchange. The relevant authority shall
expel any trading member of the Exchange who acts or attempts to act in violation
of the provisions of this Rule.

Partnership
(21)

No trading member shall form a partnership or admit a new partner to an existing

partnership or make any change in the name of an existing partnership without
intimation and prior approval of the relevant authority in such form and manner
and subject to such requirements as the relevant authority may specify from time
to time; these requirements may, inter alia, include deposits, declarations,
guarantees and other conditions to be met by and which may be binding on
partners of the firm who are not trading members.

(22)

No trading member shall, at the same time, be a partner in more than one
partnership firm which is a trading member of the Exchange.

(23)

No trading member who is a partner in any partnership firm shall assign or in any
way encumber his interest in such partnership firm.

(24)

The partnership firm shall register with the Income Tax authorities and with the
Registrar of Firms and shall produce a proof of such registration to the Exchange.

(25)

The partners of the firm shall do business only on account of the firm and jointly
in the name of the partnership firm.

(26)

The members of the partnership firm must communicate to the Exchange in

writing under the signatures of all the partners or surviving partners any change in

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such partnership either by dissolution or retirement or death of any partner or

partners.
(27)

Any notice of the Exchange intimating dissolution of a partnership shall contain a

statement as to who undertakes the responsibility of settling all outstanding
contracts and liabilities of the dissolved partnership firm but that shall not be
deemed to absolve the other partner or partners of his or their responsibility for
such outstanding contracts and liabilities.

Termination of membership
(28)

Any trading member may cease to be a member, if one or more apply:

(a)

by resignation;

(b)

by death;

(c)

by expulsion in accordance with the provisions contained in the Bye Laws,

Rules and Regulations;

(d)

by being declared a defaulter in accordance with the Bye Laws, Rules and
Regulations of the Exchange;

(e)

by dissolution in case of partnership firm;

(f)

by winding up or dissolution of such company in case of a limited

company.

Resignation
(29)

(a)

A trading member who intends to resign from the trading membership of

the Exchange shall intimate to the Exchange a written notice to that effect
which shall be displayed on the trading system.

(b)

Any member of the Exchange objecting to any such resignation shall

communicate the grounds of his objection to the relevant authority by
letter within such period as may be specified by the relevant authority
from time to time.

(c)

The relevant authority may accept the resignation of a member either

unconditionally or on such conditions as it may think fit or may refuse to
accept such resignation and in particular may refuse to accept such
resignation until it is satisfied that all outstanding transactions with such
member have been settled.

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Death
(30)

On the death of a member, his legal representatives and authorised

representatives, if any, shall communicate due intimation thereof to the relevant
authority in writing.

Failure to pay Charges

(31)

Save as otherwise provided in the Bye Laws, Rules and Regulations of the
Exchange if a member fails to pay his annual subscription, fees, charges or other
monies which may be due by him to the Exchange or to the Clearing House
within such time as the relevant authority may prescribe from time to time after
notice in writing has been served upon him by the Exchange, he may be
suspended by the relevant authority until he makes payment and if within a
further period of fifteen days he fails to make such payment, he may be expelled
by the relevant authority.

Continued Admittance
(32)

The relevant authority shall from time to time prescribe conditions and
requirements for continued admittance to trading membership which may, inter
alia, include maintenance of minimum networth and capital adequacy, renewal of
certification, if any, etc. The trading membership of any person who fails to meet
these requirements shall be liable to be terminated.

Readmission of Defaulters
(33)

A trading members right of membership shall lapse and vest with the
Exchange immediately he is declared a defaulter. The member who is
declared a defaulter shall forfeit all his rights and privileges as a
member of the Exchange, including any right to use of or any claim
upon or any interest in any property or funds of the Exchange, if any.

(34)

The relevant authority may readmit a defaulter as a trading member subject to the
provisions as may be prescribed by the relevant authority from time to time.

(35)

The relevant authority may readmit only such defaulter who in its opinion:
(a)

has paid up all dues to the Exchange, other trading members and
constituents;

(b)

has no insolvency proceedings against him in a Court or has not been

declared insolvent by any Court;

(c)

has defaulted owing to the default of principals whom he might have

reasonably expected to be good for their commitments;
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(d)

has not been guilty of bad faith or breach of the Bye Laws, Rules and
Regulations of the Exchange;

(e)

has been irreproachable in his general conduct.

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IV. DISCIPLINARY PROCEEDINGS, PENALTIES, SUSPENSION

AND EXPULSION
Disciplinary Jurisdiction
(1)

The relevant authority may expel or suspend and/or fine under censure and/or
warn and/or withdraw any of the membership rights of a trading member if it be
guilty of contravention, non-compliance, disobedience, disregard or evasion of
any of the Bye Laws, Rules and Regulations of the Exchange or of any
resolutions, orders, notices, directions or decisions or rulings of the Exchange or
the relevant authority or of any other Committee or officer of the Exchange
authorised in that behalf or of any conduct, proceeding or method of business
which the relevant authority in its absolute discretion deems dishonourable,
disgraceful or unbecoming a trading member of the Exchange or inconsistent with
just and equitable principles of trade or detrimental to the interests, good name or
welfare of the Exchange or prejudicial or subversive to its objects and purposes.

Penalty for Misconduct, Unbusinesslike Conduct and Unprofessional Conduct

(2)

In particular and without in any way limiting or prejudicing the generality of the
provisions in Rule (1) above, a trading member shall be liable to expulsion or
suspension or withdrawal of all or any of its membership rights and/or to payment
of a fine and/or to be censured, reprimanded or warned for any misconduct,
unbusinesslike conduct or unprofessional conduct in the sense of the provision in
that behalf contained herein.

Misconduct
(3)
A trading member shall be deemed guilty of misconduct for any of the following
or similar acts or omissions namely:
(a)

Fraud : If it is convicted of a criminal offence or commits fraud or a

fraudulent act which in the opinion of the relevant authority renders it
unfit to be a trading member;

(b)

Violation : If it has violated provisions of any statute governing the

activities, business and operations of the Exchange, trading members and
securities business in general;

(c)

Improper Conduct : If in the opinion of the relevant authority it is guilty of

dishonourable or disgraceful or disorderly or improper conduct on the
Exchange or of willfully obstructing the business of the Exchange;

(d)

Breach of Rules, Bye Laws and Regulations : If it shields or assists or

omits to report any trading member whom it has known to have committed
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a breach or evasion of any Rule, Bye-law and Regulation of the Exchange

or of any resolution, order, notice or direction thereunder of the relevant
authority or of any Committee or officer or the Exchange authorised in
that behalf;
(e)

Failure to comply with Resolutions : If it contravenes or refuses or fails to

comply with or abide by any resolution, order, notice, direction, decision
or ruling of the relevant authority or of any Committee or officer of the
Exchange or other person authorised in that behalf under the Bye Laws,
Rules and Regulations of the Exchange;

(f)

Failure to submit to or abide by Arbitration : If it neglects or fails or

refuses to submit to arbitration or to abide by or carry out any award,
decision or order of the relevant authority or the Arbitration Committee or
the arbitrators made in connection with a reference under the Bye Laws,
Rules and Regulations of the Exchange;

(g)

Failure to testify or give information : If it neglects or fails or refuses to

submit to the relevant authority or to a Committee or an officer of the
Exchange authorised in that behalf, such books, correspondence,
documents and papers or any part thereof as may be required to be
produced or to appeal and testify before or cause any of its partners,
attorneys, agents, authorised representatives or employees to appear and
testify before the relevant authority or such Committee or officer of the
Exchange or other person authorised in that behalf;

(h)

Failure to submit Special Returns : If it neglects or fails or refuses to

submit to the relevant authority within the time notified in that behalf
special returns in such form as the relevant authority may from time to
time prescribe together with such other information as the relevant
authority may require whenever circumstances arise which in the opinion
of the relevant authority make it desirable that such special returns or
information should be furnished by any or all the trading members;

(i)

Failure to submit Audited Accounts: If it neglects or fails or refuses to

submit its audited accounts to the Exchange within such time as may be
prescribed by the relevant authority from time to time.

(j)

Failure to compare or submit accounts with Defaulter : If it neglects or

fails to compare its accounts with the Defaulters Committee or to submit
to it a statement of its accounts with a defaulter or a certificate that it has
no such account or if it makes a false or misleading statement therein;

(k)

False or misleading Returns : If it neglects or fails or refuses to submit or

makes any false or misleading statement in its clearing forms or returns
required to be submitted to the Exchange under the Bye Laws, Rules and
Regulations;

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(l)

Vexatious complaints : If it or its agent brings before the relevant authority

or a Committee or an officer of the Exchange or other person authorised in
that behalf a charge, complaint or suit which in the opinion of the relevant
authority is frivolous, vexatious or malicious;

(m)

Failure to pay dues and fees : If it fails to pay its subscription, fees,
arbitration charges or any other money which may be due by it or any fine
or penalty imposed on it.

Unbusinesslike Conduct
(4)

A trading member shall be deemed guilty of unbusinesslike conduct for any of the
following or similar acts or omissions namely :
(a)

Fictitious Names : If it transacts its own business or the business of its

constituent in fictitious names or if he carries on business in more than one
trading segment of the Exchange under fictitious names;

(b)

Fictitious Dealings : If it makes a fictitious transaction or gives an order

for the purchase or sale of securities the execution of which would involve
no change of ownership or executes such an order with knowledge of its
character;

(c)

Circulation of rumours : If it, in any manner, circulates or causes to be

circulated, any rumours;

(d)

Prejudicial Business : If it makes or assists in making or with such

knowledge is a party to or assists in carrying out any plan or scheme for
the making of any purchases or sales or offers of purchase or sale of
securities for the purpose of upsetting the equilibrium of the market or
bringing about a condition in which prices will not fairly reflect market
values;

(e)

Market Manipulation and Rigging : If it, directly or indirectly, alone or

with other persons, effects series of transactions in any security to create
actual or apparent active trading in such security or raising or depressing
the prices of such security for the purpose of inducing purchase or sale of
such security by others;

(f)

Unwarrantable Business : If it engages in reckless or unwarrantable or

unbusinesslike dealings in the market or effects purchases or sales for its
constituents account or for any account in which it is directly or indirectly
interested which purchases or sales are excessive in view of its
constituents or his own means and financial resources or in view of the
market for such security;

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(g)

Compromise : If it connives at a private failure of a trading member or

accepts less than a full and bona fide money payment in settlement of a
debt due by a trading member arising out of a transaction in securities;

(h)

Dishonoured Cheque : If it issues to any other trading member or to its

constituents a cheque which is dishonoured on presentation for whatever
reasons;

(i)

Failure to carry out transactions with Constituents : If it fails in the

opinion of the relevant authority to carry out its committed transactions
with its constituents;

Unprofessional Conduct
(5)

A trading member shall be deemed guilty of unprofessional conduct for any of the
following or similar acts or omissions namely :
(a)

Business in Securities in which dealings not permitted : If it enters into

dealings in securities in which dealings are not permitted;

(b)

Business for Defaulting Constituent : If it deals or transacts business

directly or indirectly or executes an order for a constituent who has within
its knowledge failed to carry out engagements relating to securities and is
in default to another trading member unless such constituent shall have
made a satisfactory arrangement with the trading member who is its
creditor;

(c)

Business for Insolvent : If without first obtaining the consent of the

relevant authority it directly or indirectly is interested in or associated in
business with or transacts any business with or for any individual who has
been bankrupt or insolvent even though such individual shall have obtained his final discharge from an Insolvency Court;

(d)

Business without permission when under suspension : If without the

permission of the relevant authority it does business on its own account or
on account of a principal with or through a trading member during the
period it is required by the relevant authority to suspend business on the
Exchange;

(e)

Business for or with suspended, expelled and defaulter trading members :

If without the special permission of the relevant authority it shares
brokerage with or carries on business or makes any deal for or with any
trading member who has been suspended, expelled or declared a defaulter;

(f)

Business for Employees of other trading members : If it transacts business

directly or indirectly for or with or executes an order for an authorised
representative or employee of another trading member without the written
consent of such employing trading member;
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(g)

Business for Exchange Employees : If it makes a speculative transaction in

which an employee of the Exchange is directly or indirectly interested;

(h)

Advertisement : If it advertises for business purposes or issues regularly

circular or other business communications to persons other than its own
constituents, trading members of the Exchange, Banks and Joint Stock
Companies or publishes pamphlets, circular or any other literature or
report or information relating to the stock markets without the prior
written permission of the Exchange or in contravention of the
advertisement code prescribed by the Exchange;

(i)

Evasion of Margin Requirements : If it willfully evades or attempts to

evade or assists in evading the margin requirements prescribed in these
Bye Laws and Regulations;

(j)

Brokerage Charge : If it willfully deviates from or evades or attempts to

evade the Bye Laws and Regulations relating to charging and sharing of
brokerage.

(k)

Dealings with entities prohibited to buy or sell or deal in securities market:

If it deals, directly or indirectly, in the course of its business with or
transacts any business with or for any entity, which has been prohibited by
SEBI to buy or sell or deal in the securities market.

Trading members responsibility for Partners, Agents and Employees

(6)

A trading member shall be fully responsible for the acts and omissions of its
authorised officials, attorneys, agents, authorised representatives and employees
and if any such act or omission be held by the relevant authority to be one which
if committed or omitted by the trading member would subject it to any of the
penalties as provided in the Bye Laws, Rules and Regulations of the Exchange
then such trading member shall be liable therefor to the same penalty to the same
extent as if such act or omission had been done or omitted by itself.

Suspension on failure to provide margin deposit and/or Capital Adequacy

requirements
(7)

The relevant authority shall require a trading member to suspend its business
when it fails to provide the margin deposit and/or meet capital adequacy norms as
provided in these Bye Laws, Rules and Regulations and the suspension of
business shall continue until it furnishes the necessary margin deposit or meet
capital adequacy requirements. The relevant authority may expel a trading
member acting in contravention of this provision.

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Suspension of Business :
(8)

The relevant authority may require a trading member to suspend its business in
part or in whole :
(a)

Prejudicial Business : When in the opinion of the relevant authority, the

trading member conducts business in a manner prejudicial to the Exchange
by making purchases or sales of securities or offers to purchase or sell
securities for the purpose of upsetting equilibrium of the market or
bringing about a condition of demoralisation in which prices will not fairly
reflect market values, or

(b)

Unwarrantable Business : When in the opinion of the relevant authority it

engages in unwarrantable business or effects purchases or sales for its
constituents account or for any account in which it is directly or indirectly
interested which purchases or sales are excessive in view of its
constituents or its own means and financial resources or in view of the
market for such security, or

(c)

Unsatisfactory Financial Condition : When in the opinion of the relevant

authority it is in such financial condition that it cannot be permitted to do
business with safety to its creditors or the Exchange.

Removal of Suspension
(9)

The suspension of business under clause (8) above shall continue until the trading
member has been allowed by the relevant authority to resume business on its
paying such deposit or on its doing such act or providing such thing as the
relevant authority may require.

Penalty for Contravention

(10)

A trading member who is required to suspend its business shall be expelled by the
relevant authority if he acts in contravention of this provision.

Trading members and others to testify and give information

(11)

A trading member shall appear and testify before and cause its partners, attorneys,
agents, authorised representatives and employees to appear and testify before the
relevant authority or before other Committee(s) or an officer of the Exchange
authorised in that behalf and shall produce before the relevant authority or before
other Committee(s) or an officer of the Exchange authorised in that behalf, such
books, correspondence, documents, papers and records or any part thereof which
may be in its possession and which may be deemed relevant or material to any
matter under inquiry or investigation.

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Permission necessary for Legal Representation

(12)

No person shall have the right to be represented by professional counsel, attorney,

advocate or other representative in any investigation or hearing before the
relevant authority or any other Committee unless the relevant authority or other
Committee so permits.
Explanation before suspension or expulsion
(13)

A trading member shall be entitled to be summoned before the relevant authority

and afforded an opportunity for explanation before being suspended or expelled
but in all cases the findings of the relevant authority shall be final and conclusive.

Temporary Suspension
(13 A) (a)

Notwithstanding what is contained in clause (13) herein above if in the

opinion of the Managing Director it is necessary to do so, he may, for
reasons to be recorded in writing, temporarily suspend a trading member,
pending completion of the proceedings for suspension under this chapter
by the relevant authority, and no notice of hearing shall be required for
such temporary suspension and such temporary suspension shall have the
same consequences of suspension under this chapter.

(b)

A notice to show cause shall be issued to the trading member within five
working days of such temporary suspension.

(c)

Any such temporary suspension may be revoked at the discretion of the

Managing Director, for reasons to be recorded in writing, if the Managing
Director is satisfied that the circumstances leading to the formations of
opinion of the Managing Director to effect temporary suspension, have
ceased to exist or are satisfactorily resolved.

(d)

A trading member aggrieved by the temporary suspension may appeal to

the relevant authority, provided that such appeal shall not automatically
suspend the temporary suspension unless otherwise directed by the
relevant authority.

Effect of suspension of registration by SEBI

(13B) Notwithstanding anything contained in any of the Byelaws and Rules of the
Exchange, if the registration of a Trading Member is suspended by SEBI, such
Trading Member shall ipso facto stand suspended from the trading membership of
the Exchange for the period of suspension, so imposed by SEBI or till such
suspension is in force.

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Imposition of Penalties
(14)

The penalty of suspension, withdrawal of all or any of the membership rights,

fine, censure or warning may be inflicted singly or conjointly by the relevant
authority. The penalty of expulsion may be inflicted by the relevant authority.

Pre-determination of Penalties
(15)

The relevant authority shall have the power to pre-determine the penalties, the
period of any suspension, the withdrawal of particular membership rights and the
amount of any fine that would be imposed on contravention, non-compliance,
disobedience, disregard or evasion of any Bye Law, Rules or Regulation of the
Exchange or of any resolution, order, notice, direction, decision or ruling
thereunder of the Exchange, the relevant authority or of any other Committee or
officer of the Exchange authorised in that behalf.

Commutation
(16)

Subject to the provision of the Securities Contracts (Regulation) Rules, 1957 the
relevant authority in its discretion may in any case suspend a trading member in
lieu of the penalty of expulsion or may withdraw all or any of the membership
rights or impose a fine in lieu of the penalty of suspension or expulsion and may
direct that the guilty trading member be censured or warned or may reduce or
remit any such penalty on such terms and conditions as it deems fair and
equitable.

Reconsideration/Review
(17)

Subject to the provisions of the Securities Contracts (Regulation) Rules, 1957 the
relevant authority may of its own motion or on appeal by the trading member
concerned within 90 days from the date of communication of decision of the
relevant authority to the member reconsider and may rescind, revoke or modify its
resolution withdrawing all or any of the membership rights or fining, censuring or
warning any trading member. In a like manner the relevant authority may
rescind, revoke or modify its resolution expelling or suspending any trading
member.

Failure to pay fines and penalties

(18)

If a trading member fails to pay any fine or penalty imposed on it within such
period as prescribed from time to time by the relevant authority after notice in
writing has been served on it by the Exchange it may be suspended by the
relevant authority until it makes payment and if within a further period as

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prescribed from time to time it fails to make such payment it may be expelled by
the relevant authority.
Consequence of Suspension
(19)

The suspension of a trading member shall have the following consequences

namely:
(a)

Suspension of Membership Rights : The suspended trading member shall

during the terms of its suspension be deprived of and excluded from all the
rights and privileges of membership including the right to attend or vote at
any meeting of the general body of trading members of the relevant
segment, but it may be proceeded against by the relevant authority for any
offence committed by it either before or after its suspension and the
relevant authority shall not be debarred from taking cognisance of and
adjudicating on or dealing with any claim made against it by other trading
members;

(b)

Rights of creditors unimpaired : The suspension shall not affect the rights
of the trading members who are creditors of the suspended trading
member;

(c)

Fulfillment of Contracts : The suspended trading member shall be bound

to fulfil contracts outstanding at the time of its suspension;

(d)

Further business prohibited : The suspended trading member shall not

during the terms of its suspension make any trade or transact any business
with or through a trading member provided that it may with the permission
of the relevant authority close with or through a trading member the
transactions outstanding at the time of its suspension;

(e)

Trading members not to deal : No trading member shall transact business

for or with or share brokerage with a suspended trading member during
the terms of its suspension except with the previous permission of the
relevant authority.

Consequences of Expulsion
(20) The expulsion of a trading member shall have the following consequences
namely:
(a)

Trading membership Rights forfeited : The expelled trading

member shall forfeit to the Exchange its right of trading
membership and all rights and privileges as a trading member of
the Exchange including any right to the use of or any claim upon
or any interest in any property or funds of the Exchange but any
liability of any such trading member to the Exchange or to any

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trading member of the Exchange shall continue and remain

unaffected by its expulsion;
(b)

Office vacated : The expulsion shall create a vacancy in any office or

position held by the expelled trading member;

(c)

Rights of Creditors unimpaired : The expulsion shall not affect the rights
of the trading members who are creditors of the expelled trading member;

(d)

Fulfillment of Contracts : The expelled trading member shall be bound to

fulfil transactions outstanding at the time of his expulsion and it may with
the permission of the relevant authority close such outstanding
transactions with or through a trading member;

(e)

Trading members not to deal : No trading member shall transact business

for or with or share brokerage with the expelled trading member except
with the previous permission of the relevant authority.

(f)

Consequences of declaration of defaulter to follow : The provisions of

Chapter XII and Chapter XIII of the Byelaws pertaining to default and
Protection Fund respectively, shall become applicable to the Trading
Member expelled from the Exchange as if such Trading Member has been
declared a defaulter.

Expulsion Rules to Apply

(21)

When a trading member ceases to be such under the provisions of these Bye Laws
otherwise than by death, default or resignation it shall be as if such trading
member has been expelled by the relevant authority and in that event all the
provisions relating to expulsion contained in these Rules shall apply to such
trading member in all respects.

Suspension of Business
(22)

(a)

The relevant authority shall require a trading member to suspend its

business when it fails to maintain or provide further security as prescribed
in the Bye Laws and Regulations and the suspension shall continue until it
pays the necessary amount by way of security.

(b)

Penalty for Contravention : A trading member who is required to suspend

its business under clause (a) shall be expelled by the relevant authority if it
acts in contravention of the provisions of the Bye Laws.

Notice of Penalty and suspension of Business

(23)

Notice shall be given to the trading member concerned and to the trading
members in general by a notice on the trading system of the Exchange of the
expulsion or suspension or default of or of the suspension of business by a trading
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member or of any other penalty imposed on it or on its partners, attorneys, agents,

authorised representatives or other employees. The relevant authority may in its
absolute discretion and in such manner as it thinks fit notify or cause to be
notified to the trading members of the Exchange or to the public that any person
who is named in such notification has been expelled, suspended, penalised or
declared a defaulter or has suspended its business or ceased to be a trading
member. No action or other proceedings shall in any circumstances be
maintainable by such person against the Exchange or the relevant authority or any
officer or employee of the Exchange for the publication or circulation of such
notification and the application for trading membership or the application for
registration as the constituted attorney or authorised representative or by the
person concerned shall operate as license and the Bye Laws, Rules and
Regulations shall operate as leave to print, publish or circulate such advertisement
or notification and be pleadable accordingly.
(24)

The Relevant authority for the purpose of this Chapter shall be the Disciplinary
Action Committee as may be constituted by the Board of Directors from time to
time. At any point of time, not less than eighty percent of the members of the
Disciplinary Action Committee shall be from among non-trading members, who
shall be nominated by the Exchange
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