NSE asks brokers to strictly follow trading compliance norms

MUMBAI: Leading bourse NSE has asked all its member brokers to strictly adhere to trading compliance norms of the exchange and to ensure that each order placed by them is within the prescribed limits.

The move follows a 900-point flash crash in the stock market benchmark Nifty earlier this month due to erroneous orders placed by a brokerage firm Emkay Global on October 5, due to which trading had to be halted for 15 minutes.

In three separate circulars for the cash, currency derivatives and Futures & Options markets, the National Stock Exchange (NSE) has also reinforced the need for the member brokers of the respective segments to submit their compliance reports to the exchange on a quarterly basis.

An NSE official said that these measures are already in place, but the exchange is now seeking stricter adherence by the brokers in their compliance with the norms.

While executing their orders, the trading members need to review quantity and value limit for each order, user and branch value limit for each user identity and spread order quantity and value limit, NSE said.

In their quarterly compliance reports, the brokers need to provide all these details, as also the limits prescribed after assessing the risks associated with each user of the trading terminal and that of the branch.

The limits needs to be set up after taking into account the member's capital adequacy requirements. All the limits are reviewed regularly and should be up to date in the system.

It further said all the branch or user should have defined limits and daily record of these limits needs to preserved and should be produced before the exchange as and when the information is called for.

The NSE said that the compliance would be monitored as a part of annual system audit and the system auditor would verify the compliance officer's certificates confirming that the systems and and its records are maintained as prescribed by the exchange.

It also said that quarterly compliance certificate for the three months ended December 2012 must be submitted to the exchange before January 15, 2013.