(1) The application under regulation 4 shall be governed by the provisions of the Act, rules and these regulations.
(2) An applicant seeking recognition as a stock exchange or clearing corporation shall comply with the following conditions, namely :—
(a) the applicant is a company limited by shares;
(b) the applicant is demutualised;
(c) the applicant, its directors and its shareholders who hold or intend to hold shares, are fit and proper persons as specified in regulation 20;
(d) the applicant satisfies the requirements relating to the ownership and governance structure specified in these regulations;
(e) the applicant satisfies the networth requirements specified in these regulations;
(f) the applicant satisfies the requisite capability including its financial capacity, functional expertise and infrastructure.
Explanation.—For the purposes of this sub-regulation, the term "demutualised" means that the ownership and management of the applicant is segregated from the trading rights or clearing rights, as the case may be, in terms of these regulations.
(3) An applicant seeking recognition as a stock exchange shall, in addition to the conditions as specified in sub-regulations (1) and (2), comply with the following conditions, namely:—
(a) the applicant has the necessary infrastructure for the orderly execution of trades;
(b) the applicant has an online screen-based trading system;
(c) the applicant has an online surveillance capability which monitors positions, prices and volumes in real time so as to ensure market integrity;
(d) the applicant has adequate infrastructure to list securities for trading on its platform, wherever applicable;
(e) the applicant has necessary capability to have a nationwide network of trading members and has adequate facility to admit and regulate its members;
(f) the applicant has made necessary arrangements to establish connectivity with its trading members and clearing corporation;
(g) the applicant has adequate Investor Protection Fund and Investor Services Fund;
(h) the applicant has adequate investor grievances redressal mechanism and arbitration mechanism to resolve disputes arising out of trades and its settlement;
(i) the applicant has the facility to disseminate information about trades, quantities and quotes in real time to at least two information vending networks which are accessible to investors in the country;
(j) the applicant has adequate systems' capacity supported by a business continuity plan including a disaster recovery site;
(k) the applicant has in its employment, sufficient number of persons having adequate professional and other relevant experience;
(l) the business feasibility plan has been appraised by a reputed agency having expertise in securities market; and
(m) any other conditions as may be specified by the Board.
(4) An applicant seeking recognition as a clearing corporation shall, in addition to the conditions as specified in sub-regulations (1) and (2), comply with the following conditions, namely:—
(a) the applicant has necessary infrastructure to ensure timely clearing and settlement of trades;
(b) the applicant has adequate risk management mechanism;
(c) the applicant has a settlement procedure including netting, novation and guarantee for settlement of trades in place, which is in accordance with the manner specified by the Board;
(d) the applicant has the capacity to establish a fund to guarantee settlement of trades;
(e) the applicant has necessary capability to have a wide network of clearing members and has adequate facility to admit and regulate its members;
(f) the applicant has established connectivity with the depositories, clearing banks, stock exchange and clearing members;
(g) the applicant has adequate systems' capacity for on-line/real time risk management of trades cleared and settled and is supported by a suitable business continuity plan including a disaster recovery site;
(h) the applicant has in its employment, sufficient number of persons having adequate professional and other relevant experience to the satisfaction of the Board;
(i) the applicant has the necessary arrangements in place for resolving disputes and redressal of grievances arising out of clearing and settlement of trades;
(j) the applicant has an agreement with a depository and with a recognised stock exchange in respect of clearing and settlement of the trades;
(k) the business feasibility plan has been appraised by a reputed agency having expertise in securities market; and
(l) any other conditions as may be specified by the Board.
(5) The Board may, on being satisfied with the capability of the applicant to comply with the conditions laid down in this regulation, grant in-principle approval to the applicant which shall be valid for a period of one year.
Provided that the Board may, upon sufficient cause shown by the applicant, extend the validity of in-principle approval for a further period not exceeding six months or any other period as specified by the Board.
(6) An application for recognition shall be made in the manner as specified under PART –D of Schedule – II of these regulations.
Power to make inquiries and call for information
8. The Board may, before granting recognition to a stock exchange or clearing corporation, make inquiries and require such further information or document to be furnished, as it may deem necessary.
Grant of recognition