operations processes at the exchanges in india 29 may 2012, mumbai 14 th acg cross training seminar
TRANSCRIPT
Operations Processes at the Exchanges in India
29 May 2012, Mumbai
14th ACG Cross Training Seminar
Section Contents
A Role and Functions of a Stock Exchange
B Exchange Process Landscape
A
2
Role and Functions of a Stock Exchange
3
Business of Running the Exchange Marketplace
Trading Business
• Providing Trading Floors / Market segments for Buying/Selling of securities (Price Discovery, Market
Quality, Formulating business rules for market activity)
• Market Participants (On-boarding and Continued compliance)
• Market Surveillance, Control and Disciplinary Actions
• Participant Access (Empanelment of 3rd Party Brokerage Solution Providers)
Listing Business
• Initial Listing of Securities (IPO, OFS, PP, etc.)
• Listing Compliance (On-going disclosure of corporate information)
Index Business
• Index definition and maintenance
• Index Data Distribution
• Index Licensing
Data Business
• Data Dissemination (Reference, Market, Corporate, Participants)
• Data Vendor Enrollment
Others
• Providing/enabling IT and telecommunications infrastructure
• Education, Certification & Research Initiatives
• Investor protection
• Corporate Branding
• Treasury and Investments
4
In addition to the Stock Exchange business…
Regulated Entity under Securities Contract (Regulation) Act (SCRA) 1956 and SEBI Act
– SCRA provides for process of ‘Recognition’ and ‘Continual Supervision’ of Stock Exchanges, listing of securities and contracts in securities available for trading on a Stock Exchange
– Listing norms of stock exchanges need to conform to the minimum listing criteria set out in the Rules
– Competition from ATS regulated by regulation
Public institution, more than 'commercial' responsibility
Act as a Self Regulatory Organization (SRO) in addition to other functions
Focus on investor interest and fair trading practices
Stock Exchanges - Indian Context
5
BSE Group
BSE Group
Board of Directors
BSE USE NPEXNPEX ICCL CDSL
Marketplace Technologies
100%100% 15%15% 15%15% 100%100% 54%54%
100%100%
Equities Equity Derivatives Mutual Funds ETFs SME Corporate Debt SLB
Currency Derivatives
Interest Rate Derivatives
Power Carbon credits
Clearing Settlement Risk Management
Depository Record Keeping
IT Services Network
BSE Institute
Training Certification
MarketsMarkets
100%100%
ServicesServices
InfrastructureInfrastructure
6
30%30%
IIAS*
Proxy Advisory Services
* As on 31st Dec 2011
Exchange Process Landscape
7
Business / MarketEnvironment
Market Factors
Competition
Customers
Technology Environment
OperationalEnvironment
Governance
Delegation
Roles & Responsibilities
Risk Management
Internal Automation
Technological Innovations & Best Practices
Regulatory Environment
NewRegulations
Compliance Framework
Key Drivers That Shape Up Business Processes
Core Business Functions
8
Listing Policy
Listing
Listing Compliance
On-line Monitoring
Off-line Surveillance
Surveillance
Research
Membership
Education
Certification
Trading
Listing Operations
Member Admission
Member Inspection / Investigation
Member Compliance
Disciplinary Action
Investor Services & Protection
Arbitration
Investor Grievances
Training
IPF Management
Asset Classes
Warrants ETF/MF
Equity Interest Rate
Equity Fixed Income
Local Index CurrencyDerivatives Foreign IndexLinkages
Market Intermediaries
Data Agencies
Investors
Regulatory / Statutory
Bodies
Issuers
Brokerage Solution Vendors
Technology Vendors
Shareholders
Other Exchanges
Educational Institutions
Media
Helpdesk
New Business Initiatives
Admin
Finance & Accounts
Corporate Communications
HR
Information Technology
IT Development
IT Operations
IT Network
Market Operations
Troubleshooting
Trading Platform –
NewDevelopment
Trading / Operating
Rules
Trading Commercials
Trading API Management
Legal & SecretarialMember Business
Development
Information Vending
DataProductsPolicy
Data Dissemination
Operations
Website Management
Index Services
Index Management
Index Operations
Decision Support
Tools
IT Security
Clearing Corporation Internal Control
Exchange Process Landscape
9
Listing Operations Admission of securities (Equities, Warrants, MF,
etc) through various modes such as IPO, OFS, PP as per Listing Policy and Exchange Rules & Regulations
De-listing, Re-listing/ Revocation Listing commercials (Listing Fees) Facilitating Buy-back of shares of promoter
entity Monitoring, dissemination, maintenance of
corporate announcements, financial results of listed corporations
Determining trading eligibility and settlement mechanism of securities (Example – SPOS, Trade For Trade)
MIS reporting Market Communication Listing Ceremony
Process Overview : Listing
10
Listing Policy & Compliance Formulation and review of Listing Policy and
Admission Norms
Monitoring shareholding pattern
Monitoring of insider trading activities and ensuring compliance
Liaison with SEBI for Listing Compliance matters
Advisory support in Listing Applications processing
Membership Admission of Members as Trading/Clearing
members for various segments – Equity, F&O, SLB, Debt as per Exchange Rules & Regulations
Surrender of membership Registration & Appointment of Sub-brokers,
Authorized Persons, Remisiers Approvals on various trading mechanisms –
Internet Trading, Direct Market Access (DMA), Mobile Trading, Smart Order Routing (SOR), Algo Trading as per regulatory guidelines
Monitoring of members’ Net-worth, Balance Sheet, Financial Statements on annual basis
SEBI Turnover fees processing Maintenance of member information
(shareholding pattern, designated directors, company status , membership transfer, etc.)
MIS reporting Market Communication
Process Overview : Membership & Compliance
11
Membership Inspection/Compliance Periodic Inspection (segment wise) of Member
firms at member site Monitoring Client Registration Process by
members Documentation: KYC, Agreement, RDD Registering Unique Client Code (UCC) with
Exchange
Monitoring periodic submissions by members Annual System Audit Report Semi-Annual Internal Audit Report Margin trading Compliance Report Monthly Client Funding Report
Registration of Trader IDs with respect to location & other details and assigning a unique location code
Policy making and administration of penalties for non-compliance UCC non-registration Location code mismatch Non-submission of periodic reports
Online Surveillance On-line market monitoring to detect any
irregular market practices Monitoring Market-wide Position Limits in F&O
segment for various market participants Security Surveillance
Price band review and relaxation Shifting of securities in & out of T2T Online scrip suspension
Monitoring RBI-specified FII, QFI limits on scrips Rumour Verification Regulatory Reporting
Pre-market reporting EoD reporting Daily Market Summary Weekly surveillance meetings
Publishing information on website on daily basis as per regulatory requirement – Trade statistics based on Client Types Block Deals, Bulk Deals
Process Overview : Surveillance & Supervision
12
Offline Surveillance Offline investigation for irregular market
practices (circular trading, self trades, etc) Theme based/special investigation
Disciplinary actions on member, security
Market Operations
Administration and maintenance of market segments /trading floors (Equity, Debt, Derivatives, SME), market participants, securities and trading parameters on exchange trading platform
Introduction/withdrawal of underlying (Index, Stock) for F&O trading as per entry /retention criteria prescribed by regulations
Formulating and managing business rules for trading - Operating parameters, F&O contract specifications,
revisions in tick size & market lot, corporate action adjustments
Administration of special trading schemes such as liquidity enhancement schemes (governing rules, operating parameters, obligation monitoring & member benefits, etc.)
Administration of trading commercials (transaction charges, special discounts/incentives)
MIS reporting Market Communication
Process Overview : Trading
13
Trading System Development
New developments in core trading platforms & other allied systems (end-to-end cycle) from business standpoint New requirement definition/articulation, business
impact assessment, functional design, UAT, mock drills, go-live support, post live support
Identifying new development opportunities through market feedback, competition analysis
Trading API Management
Empanelment/approval of Brokerage Solution Vendors and broker firms with in-house software
Managing new API releases, test market infrastructure, support and commercials
Governance of decision support tools/ algorithms for API based trading as per prescribed regulations
Information Vending Formulation and review of Information product
pricing policy Product Sale (real-time / delayed / historical
data), Index data to data vendors, end customers
Customer on-boarding (infrastructure, access, legal documentation, vendor enrollment)
Billing / Collections (One-time/ Monthly/Annual billing , usage reports)
Customer support SWIFT Project - Operation & maintenance of
the SWIFT system
Process Overview : Data, Index Business, IT, Corporate Website
14
Index Services New index conceptualization and launch Administration and maintenance of indices
Periodic review of index constituents for eligibility and updates
Changes in index constituents Corporate actions adjustments Re-balancing of indices Managing customized indices Industry classification
Index licensing
Information Technology Development of IT systems, application to support
Exchange business Managing Daily System Operations Managing Network Connectivity – internal as well
as external Monitoring & managing internal I.T. security Business continuity planning – managing DR site
operations
Website Management Static data / content management Dynamic data management Subscription based services
Process Overview : Others
15
Customer Servicing & Helpdesk End-to-end daily operations of BSE Helpdesk
Level 1 troubleshooting User management of all trading and allied
systems Contingency pool operations Bulk SMS, Mailers, On-line messages
Customer education and communication Awareness & training of Exchange systems to
new members New features/functionalities Business processes, practices Regulatory notices/circulars
Detailed troubleshooting and problem solving of live market related issues, queries reported by members, vendors, internal stakeholders, etc.
Investor Services & Protection Investor grievances - Handling Redressal of investor
complaints against members or companies Arbitration - Managing Arbitration cases for cases
between 2 trading members or members with clients, appointing arbitrators & administer verdicts
Investor Protection Fund - Managing of the fund as per prescribed guidelines
Investor Awareness Programmes
Corporate Communications Official Media Releases & interaction with
Print/Electronic Media Event Management Corporate & Product Branding
Member Business Development New Member acquisition Competition tracking, Market feedback Member relationship management
New Business Initiatives Cross border alliances for new products (Foreign
indices) New Product Research Data Analytics