ECN (like Physical Contract Note) in Equity Derivatives Segment

DERIVATIVES AND NEW PRODUCTS DEPARTMENT

SEBI/DNPD/143542 /Cir-43/08

November 06, 2008

To

The Managing Director / Executive Director

of Derivative Segment of NSE and BSE

and their Clearing Houses / Corporations.

Dear Sir,

Sub: Issuance of Electronic Contract Notes (ECNs) in Equity Derivatives Segment

1. This is in continuation of SEBI Circular no. DNPD/Cir-9/04 dated February 3, 2004, on the issuance of electronic contract notes as a legal document for Equity Derivatives like the physical contract note for the equity segment.

2. In consultation with the exchanges, it has now been decided to extend the facility of issuance of ECNs as a legal document using Straight Through Processing (STP) to the equity derivatives segment also.

3. Accordingly a model contract note in electronic form (IFN 515 messaging format) and confirmation of electronic contract note (IFN 598 messaging format) are enclosed as Annexure-A.

4. The Exchanges are advised to modify/amend their bye-laws, rules and regulations to;

a) Permit issuance of electronic contract note including all the standard pre-printed terms and conditions as given in the physical contract note.

b) Permit signing of the electronic contract note with a digital signature so as to make the modified format of the electronic contract note a valid legal document like the physical contract note.

c) Prescribe a standard format for the issuance of the electronic contract note.

5. The standard terms of contract as are required to be mentioned in the Contract Notes as per the Bye-laws and Regulations of exchanges, which are not contained in ECNs, shall be incorporated in the Client Broker Agreement or where applicable, the Tripartite Agreement between the stock broker, sub-broker and the client.

This circular is being issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act 1992, read with Section 10 of the Securities Contracts (Regulation) Act, 1956 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market.

Encl : Annexure-A