This has reference to SEBI Circular No. CIR/MRD/DP/26/2010 dated August 27, 2010, CIR/MRD/DP/36 /2010 dated December 09, 2010, Exchange Notice no. 20100827-4 dated August 27, 2010, Exchange Notice no. 20101210-22 dated December 10, 2010 regarding introduction of Smart Order Routing and clarifications thereof and SEBI Master Circular No. SEBI/HO/MRD/DP/CIR/P/117 dated October 25, 2019 (CIR/MRD/DP/24/2013 dated August 19, 2013 and CIR/MRD/DP/06/2014 dated February 07, 2014 on testing of software used for trading and risk management. As per the provisions of these circulars and as per the communication received from SEBI on June 23, 2020, the trading members of the Exchange, including trading members using API solutions by third party vendors, are hereby informed as under:
1. As per the provision of aforementioned SEBI Circulars and Clause B (1) of the Code of Conduct as specified in Schedule II of Regulation 9(f) of SEBI (Stock Brokers) Regulations, 1992 stipulates that the broker should execute transactions for its clients at the best available market price.
2. It has been observed that the ‘trade default preference’ inbuilt in the trading interfaces used by stock brokers / trading members for connecting to the stock exchanges is towards a particular trading venue or exchange. It is clarified that this is in contravention to the stipulations as mentioned above as they defeat the principle sought to be achieved through the abovementioned stipulations.
3. In view of the aforesaid, all the trading members including trading members using API solutions by third party vendors are hereby advised to ensure the following requirements, for seeking approval of the Exchange, for deployment of electronic systems or applications used by the trading member for connecting to the stock exchange for the purposes of trading in the securities market :
a. The aforesaid requirements specified by SEBI of providing best available price execution are implemented
b. The Systems/interfaces/front ends do not have the default option of providing preference to any particular trading venue at the time of placement of orders
c. The System Audit should explicitly include verification of 3 (a) and 3 (b) above while providing certification for seeking approval for such electronic system or application or for ongoing compliances.
4. Exchange shall also verify the implementation of the aforementioned requirement during the course of inspection.
5. Further, the existing electronic systems or applications, which have been approved by the Exchange, are also required to conform to the aforesaid requirements by August 31, 2020 and report to the Exchange to enable the Exchange to submit a compliance report to SEBI in this regard. A separate notice will be issued in due course for the manner of reporting compliance to the Exchange.
6. Non-compliance will be reported to SEBI.
Trading members are required to take note of the above and ensure compliance.
In case of any further clarifications, the trading members may contact the following officials:
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Name of the officials
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Contact No.
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Email ID
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Josephine/Deepa/ Abhishek/ Tushar
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2272 8598/8214/8743/8217
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bse.inspection@bseindia.com
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For and on behalf of BSE Ltd.
Usha Sharma Kiran Sawant
General Manager Asst. General Manager
Broker Supervision Broker Supervision |