Securities & Exchange Board of India (SEBI) vide its circular no.CIR/MRD/DP/26/2010 dated August 27, 2010 as per Annexure I, has approved and given necessary guidelines for providing Smart Order Routing (SOR).
As quoted in the SEBI circular Smart Order Routing(SOR) allows Brokers trading engines to systematically choose the execution destination based on the factors like price, cost, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of the order.
For compliance of the said circular, the guidelines are as follows:
Eligibility:
As per the SEBI Circular, SOR facility shall be provided to all class of investors.
Application for permission:
In order to avail the facility of SOR at BSE, trading members need to submit an application which will be followed by a system audit. The format of the application is attached as Annexure II.
The Application should also include Vendor certificate attested by the vendor and the self certification on the letter head of the member (provided along with the Application form). Member will need to put in place a member-client agreement as mentioned in the relevant SEBI circular
Please send applications to:
Chirag A Sodawaterwalla
Bombay Stock Exchange Ltd
Membership Compliance Department
27th Floor, P.J.Towers,
Dalal Street, Fort,
Mumbai 400001
Tel.: 022-22728156 / 22728595
Fax: 022-22721338
Prerequisites to granting of permission for Smart Order Routing (SOR):
The software and systems proposed for SOR shall be duly certified by BSE-empanelled System Auditor before grant of permission.
Only on fulfillment of the requirements mentioned in the SEBI / BSE Circulars, permission for commencing Smart Order Routing (SOR) would be granted to the Trading Member which will be within 30 calendar days of the date of receipt of application as suggested by SEBI.
BSE shall provide a test environment during a pre-specified time. The trading Members are required to test their software using the said test environment.
Members at their end are required to comply fully with the operational specifications and risk management mentioned in the SEBI circular. Also, Members must comply with guidelines issued by BSE for SOR, from time to time.
System Audit Submission frequency:
Also, once the approval is granted and the member goes live with the SOR system, the member on a yearly basis has to submit the system audit certificate duly certified by the CISA certified system auditor to inspection department. The notification will be issued to the market on a timely basis informing members about the submission.
Unique identification Number for SOR:
As suggested by SEBI, BSE shall have a unique identification number for the orders placed through SOR In order to differentiate the orders from Normal orders.
A) Only SOR
Format of Location ID which is a 16 digit code which is given below:
· From 1st digit to 6th digit – Pin Code e.g.- 400001
· From 7th digit to 10th digit – TWS/Branch ID e.g.– 9999
· From 11th digit to 13th digit – Trader / User Id e.g.– 203
· For 14th digit – Smart Order Trading Order Id – (Fixed code) – 4
· From 15th digit to 16th digit – Vendor Id e.g.- 19
Example:
If the IML terminal is located at Dalal Street, Mumbai, Pin Code is ‘400001’, the unique Member Code is ‘9999’, the trader ID is ‘203’ and since the order is a Smart Order System so the code will be ‘4’.
Hence the 16 digit code would be ‘4000019999203419’ , which starts with the Pin Code and ends with the Vendor Id.
B) SOR through DMA
As suggested by SEBI, BSE shall have a unique identification number for the orders placed through SOR in order to differentiate the orders from Normal orders.
Format of Location ID which is a 16 digit code which is given below:
· From 1st digit to 6th digit – Pin Code e.g.- 400001
· From 7th digit to 10th digit – TWS/Branch ID e.g.– 9999
· From 11th digit to 13th digit – Trader / User Id e.g.– 203
· For 14th digit – Smart Order Trading Order Id – (Fixed code) – 6
· From 15th digit to 16th digit – Vendor Id e.g. - 19
C) IML location details for SOR via Internet Based Trading
Attention of the Trading Members is drawn to Exchange Notice No. 20070531-8 dated May 31. 2007 regarding uploading of IML location information in case of Internet trading.
Further to this, Trading Members are requested to note the following while submitting the orders to the exchange coming from clients:
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Digits
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Value
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Description
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1-6 th digit
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111111
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Identification of order emanating from system approved for Smart Order Routing.
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7 th- 10th digit
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1111
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11th to13th digit
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111
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14th digit
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4 or 6
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"4"- Only SOR
"6"- SOR through DMA
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15th -16th
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XX
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Vendor Code(As per the code allotted to the vendor by the Exchange)
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For further clarifications, contact :
Below are some of the neccessary circular & documents pertaining to SOR .
Annexure I : SEBI Circular
Annexure II: Application form for SOR
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