NATIONAL STOCK EXCHANGE OF INDIA LTD

CAPITAL MARKET OPERATIONS

CIRCULAR

Ref. No. NSE/CMO/019/2009

Download No: NSE/CMTR/12289

Date: April 21, 2009

DIRECT MARKET ACCESS FACILITY

In continuation to Circular no. NSE/CMO/010/2009 dated February 26, 2009 regarding providing Direct Market Access (DMA) trading facility, members seeking permission for offering the same shall make an application to the Exchange in the format enclosed herewith.

Annexure	Contents
Annexure - A	Application form for permission for providing Direct Market Access (DMA) to clients
Annexure - B	Application form for permission for providing Direct Market Access (DMA) to clients through Investment Manager
Annexure - C	Network Diagram
Annexure - D	Model DMA Member-Client Agreement (DMA facility to clients)
Annexure - E	Model DMA Member-Client Agreement (DMA facility to Investment Manager)
Annexure - F	Format of letter to be submitted by the institutional clients to trading member for execution of Direct Market Access (DMA) orders by Investment Manager not registered in India

Members applying for seeking permission for availing Direct Market Access facility to clients need to submit Annexure – A alongwith Annexure – C. Additionally, members applying for seeking permission for availing Direct Market Access facility to clients through Investment Manager need to submit Annexure – B also. Further, member needs to submit Annexure – B for seeking approval of the Exchange every time before the Direct Market Access facility is extended to Investment Manager.

Structure of changes and Scheme governing the Use of facility relating to CTCL / Internet Based Trading / DMA is as per circular no. NSE/CMO/026/2008 dated May 09, 2008.

For further clarification kindly contact Ms. Rashmi Kumari, Mr. Kapil Jaikalyani, Ms. Prerana Nair at 022-26598150 / 022-26598446.

For and on behalf of

National Stock Exchange of India Ltd.

Suprabhat Lala

Assistant Vice President

Annexure - A

Application form for permission for providing Direct Market Access (DMA) to clients

(To be executed on letterhead of the Member)

We/I, --------------------having my/our Registered Office/Office at ----------------------------------am/are trading member/s of the Capital Market segment / Futures and Options segment of the National Stock Exchange of India Limited, hereby apply for the permission of the Exchange for providing Direct Market Access (DMA) facility and services.

A. General

S No.	Particulars	Details
1.	Name of the Trading Member:
2.	SEBI Registration number:
3.	Registered Office/ Office address: Telephone: Fax No:
4.	Name of the Authorised Signatory and designation
5.	Contact address of the Authorised Signatory: Telephone No: Fax No:
6.	Complete address of the Direct Market Access (DMA) order routing server
7.	Whether the proposed Direct Market Access facility is being provided by the member on his own	YES / NO
8.	If not, name of the service provider (SP) for providing the Direct Market Access facility.
9.	Name of the Contact Person of SP: Contact Address of SP: Telephone No: Fax No: (Copies of the agreement/MOU entered into with the SP to be enclosed.)
10.	Whether the software for the proposed Direct Market Access (DMA) is being developed by the member on his own.	YES / NO
11.	If not, name of software vendor developing software.

B. Network Security, Standards for interfaces and Protocols:

S No.	Particulars	Whether complied (Yes/No)
1	Whether the broker’s server, routing the Direct Market Access (DMA) orders to the Exchange trading system is located in India.	YES / NO
2	Whether the system has provision for security, reliability and confidentiality of data through use of encryption technology and in line with the SEBI’s directives on standards for password policy. (A detailed certificate in this regard shall be enclosed)	YES / NO
3	Whether proper audit trail, transaction logs, identification of user ID, activities / alerts logs, unique numbering of orders / trades as stipulated by SEBI are maintained in the system. (A detailed certificate in this regard shall be enclosed)	YES / NO
4	Whether adequate provisions for back-up systems and data storage capacity are in place with the member as stipulated by SEBI. (A detailed certificate in this regard shall be enclosed)	YES / NO
5	Whether password maintenance and authentication is performed at third party network service providers end	YES / NO
6	If yes, whether appropriate agreement with third party network service provider is in place for ensuring secured access and communication.	YES / NO/ NA

C. Systems Operations :

Whether the requirements of systems operations as stipulated by SEBI in this regard are complied with (A certificate in this regard as per Annexure – A (1) shall be enclosed)

D. Risk Management:

Whether the requirements of Risk Management as stipulated by SEBI in this regard are complied with (A certificate in this regard as per Annexure – A (1) shall be enclosed)

E. Others

A comprehensive write-up on the Direct Market Access (DMA) system to be enclosed

Annexure – A (1)

NOTWITHSTANDING the generality of the above, the software provided complies with the following provisions in particular as directed by SEBI / NSE.

S. No.	Requirement	Whether complied (Yes / No)
1	Access for order routing is permitted only through the use of client specific User ids
2	The access is permitted only through the use of client specified password (private code)
3	The system provides for automatic expiry of passwords at the end of a reasonable duration and reinitialisation of access on entering fresh passwords.
4	All transaction logs are maintained with proper audit facilities alongwith unique numbering for orders/trades (a write-up in this regard shall be enclosed)
5	Logic/priorities similar to those used by the Exchange is used to treat client orders.
6	Provision for maintenance of all activities / alerts log with audit trail available
7	Authorized user and client details are part of the order details received and authenticated at the DMA server of the trading member.
8	The member’s Direct Market Access (DMA) server internally generates unique numbering for all client orders/ trades.
9	Adequate provisions for maintaining back up systems and data storage capacity are available.
10	An alternative means of communication is arranged for in case of link failure ( A write up shall be provided in this regard)
11	The software provides for appropriate authority levels to ensure that the limits can be setup only by the persons authorized by the risk / compliance manager.
12	The software provides for routing of orders through electronic / automated risk management systems of the broker to carry out appropriate validations of all risk parameters including Trading Limits, Position Limits and Exposure taken by client based on risk assessment, credit quality and available margins of the client. The software also provides for appropriate validations for Quantity Limits, Price Range Checks, Order Value, and Credit Checks before the orders are released to the Exchange.
13	The software provides for Net position that can be outstanding so as to fully cover the risk emanating from the trades with the available margins of the specific client.
14	The software provides for appropriate limits for securities which are subject to FII limits as specified by RBI.
15	The software provides Direct Access Market (DMA) facility to clients only to execute his own trades and shall not use it for transactions on behalf of any other persons/ entity.
16	All orders entered into the Direct Market Access (DMA) system are offered to the market for matching and no cross trades are generated.
17	The software has the facility of providing the reports on margin requirements, payment and delivery obligations etc. to the clients through the system.

We confirm and certify that the software for Direct Market Access (DMA) has undergone tests by us and are satisfied and we undertake to comply with and be bound by the Rules, Bye-laws, Regulations of the Exchange, SEBI, RBI and any other statutory and regulatory body(ies) as may be applicable from time to time.

We certify that all the statements are true and correct to the best of our knowledge. We are aware that in case any of the statements are found to be incorrect or false, we are liable for disciplinary action.

Signed sealed and delivered by the Authorised representative of the MEMBER.

Date:

Place:

Annexure – B

Application form for permission for providing Direct Market Access (DMA) to clients through Investment Manager

(To be executed on letterhead of the Member)

We/I, --------------------having my/our Registered Office/Office at ----------------------------------am/are trading member/s of the Capital Market segment / Futures and Options of the National Stock Exchange of India Limited, hereby apply for the permission of the Exchange for providing Direct Market Access (DMA) facility and services to clients through Investment Manager.

S.No.	Particulars	Details
1.	Name of the Investment Manager
2.	Contact details of the Investment Manager: (i) Contact Number: (ii) Postal Address of the DMA terminal:
3.	Registration Details (i) Name and Address of the Regulating authority: (ii) Category of Registration: (iii) Registration Ref. No.:
4.	Whether Investment manager is authorized to execute the DMA Member-Client agreement as per the provisions of SEBI and NSE circulars.	YES / NO
5.	Whether DMA Member-Client agreement is executed between Trading Member and Investment manager giving details of the clients on behalf of whom the Investment Manager is authorized to execute trades.	YES / NO
6.	Whether letter as per Annexure – F is obtained from the client for execution of the DMA orders by Investment Manager not registered in India	YES / NO / NA
7.	DMA facility is utilized to execute trades of only those clients for which the investment manager is authorized	YES / NO
8.	Whether proper audit trails are available to establish identity of the ultimate client	YES / NO

We confirm and certify that all the requirements as per Annexure – A (1) in relation to Direct Market Access facility to clients is made applicable to Investment Mangers also. We confirm and certify that the software for Direct Market Access (DMA) has undergone tests by us and are satisfied and we undertake to comply with and be bound by the Rules, Bye-laws, Regulations of the Exchange, SEBI, RBI and any other statutory and regulatory body(ies) as may be applicable from time to time.

Signed sealed and delivered by the Authorised representative of the MEMBER.

Date:

Place:

Annexure – C

NETWORK DIAGRAM

(Kindly enclose detailed network architecture showing the geographical location of the DMA order routing server. Investment manager as an entity to be shown in the network diagram in case the DMA facility is extended to clients through Investment managers also)

Annexure – D

Model DMA Member – Client Agreement

(For providing Direct Market Access facility to clients)

This agreement is made at ___________ this ______ day of __________ between _________ (member of National Stock Exchange of India Ltd. with SEBI Registration No.:________), having his /her / its office / registered office at _________, hereinafter referred to as “MEMBER” (which expression shall, unless repugnant to the context or meaning thereof, be deemed to mean and include his/her heirs, executors and administrators / the partners of the said firm for the time being, the survivor or survivors of them and the heirs, executors and administrators of such last survivor / its successors and legal representatives, as the case may be) of the One Part.

And

Mr./Ms./M/s. ______________________, an individual / a proprietary concern / a partnership firm / a body corporate, registered / incorporated under the provisions of the Indian Partnership Act, 1932 / Companies Act, 1956, having his /her / its Permanent Account Number _____ (“PAN”) and his / her / its residence / registered office at ___________________, hereinafter referred to as “CLIENT” (which expression shall, unless repugnant to the context or meaning thereof, be deemed to mean and include his /her heirs, executors and administrators /the partners for the time being of the said firm, the survivor or survivors of them and the heirs, executors and administrators of such last survivor / its successors and legal representatives, as the case may be) of the Other Part.

WITNESSTH:

Whereas, MEMBER is permitted by the National Stock Exchange of India Limited (hereinafter called as “NSEIL”) to provide Direct Market Access (hereinafter referred to as the “DMA facility”) to its CLIENT to access the trading system of MEMBER.

Whereas the CLIENT is desirous of availing the DMA facility for the purpose of accessing the NSEIL trading system through the Member’s infrastructure.

Whereas the CLIENT has satisfied itself of the capability of the MEMBER offering DMA facility and wishes to execute his orders through him and the CLIENT shall continue to satisfy itself of such capability of the MEMBER before executing orders through him.

Whereas the MEMBER has satisfied and shall continuously satisfy himself about the genuineness and financial soundness of the CLIENT and investment objectives relevant to the services to be provided as specified by NSEIL or other relevant authority from time to time.

Whereas the MEMBER has taken steps and shall take steps to make the CLIENT aware of the precise nature of the MEMBER's liability for business to be conducted, including any limitations on that liability and the capacity in which it acts.

In consideration of the mutual understanding as set forth in this agreement, the parties thereto have agreed to the following terms and conditions:

1. The CLIENT agrees that the trading facility under Direct Market Access (DMA) is used only to execute own trades and shall not use it for transactions on behalf of any other person/entity and/or for any other purpose/s.

2. The CLIENT shall not provide, directly or indirectly, the facility or any portion of the facility to any third party.

3. The CLIENT shall supply all information which MEMBER may reasonably request in writing concerning CLIENT and use of the Services including Know Your Client requirements. MEMBER may report this information to the NSEIL wherever the same is sought by the NSEIL.

4. The MEMBER shall authorize individual users at the CLIENT end.

5. The CLIENT shall ensure that only persons Authorised by CLIENT access and use the systems and all orders are authorised by the CLIENT.

6. The CLIENT shall access each DMA facility only through the use of password specified by MEMBER or by the third party network service provider. The CLIENT is solely responsible for ensuring that the passwords are known to and used only by those users authorized by CLIENT(‘Authorised Users’). Unless the CLIENT has received the Member’s approval, any use of the DMA facility by Authorized Users who are located outside of the jurisdiction of country of domicile of the CLIENT is strictly prohibited.

7. The CLIENT agrees to be bound by the various risk management requirements that the MEMBER shall impose for the usage of DMA facility.

8. The CLIENT agrees that the MEMBER has right to withdraw the DMA facility -

i) in case of any breach of the limits imposed by the MEMBER or any regulatory authority.

ii) on account of any misuse or on instructions from SEBI/NSEIL.

9. The CLIENT shall be solely responsible for all acts or omissions of any person using a DMA facility provided by MEMBER and bound by the terms of all transactions executed through DMA facility. All transactions /messages generated by use of DMA facility shall be deemed to be authorized by CLIENT.

10. The CLIENT shall notify MEMBER in the event of DMA facility being compromised. Upon receipt of this notice, Client’s DMA facility shall be promptly cancelled but CLIENT shall be responsible for any actions taken through the use of such DMA facility before they are cancelled.

11. The provisions of this agreement shall always be subject to the Byelaws, Rules, Regulations and Circulars issued by NSEIL from time to time and the rules, regulations and guidelines issued by SEBI /applicable regulatory bodies that may be in force from time to time.

12. The agreement entered into between the MEMBER and the CLIENT shall stand terminated by mutual consent of the parties by giving at least one month written notice. Such cancellation or termination shall not have any effect on transaction executed before the date of such notice of termination and the parties shall enjoy the same rights and shall have same obligations in respect of such transactions.

13. The instructions issued by an authorized representative of the CLIENT shall be binding on the CLIENT in accordance with the letter authorizing the said representative to deal on behalf of the CLIENT.

14. In the event of death or insolvency of the CLIENT or his otherwise becoming incapable of honoring obligation, MEMBER may close out the transaction of the CLIENT and the CLIENT or his legal representative shall be liable for any losses, costs and be entitled to any surplus which may result there from.

15. Regardless of any other provision of the Agreement, MEMBER have the right to terminate (temporarily or permanently and at any time, with or without cause or prior notice) all or any part of any facility, or access to any facility, or to change the nature, composition or availability of any facility.

16. The CLIENT is aware that authentication technologies and strict security measures are required for routing orders through DMA facility and undertakes to ensure that the password of the CLIENT and/or his authorized representative are not revealed to any third party.

17. The CLIENT agrees that the MEMBER shall not be liable or responsible for non-execution of the orders of the CLIENT due to any link/system failure at the CLIENT/ MEMBER/ NSEIL end. MEMBER shall make no warranty, express or implied, to CLIENT concerning the DMA facility. CLIENT expressly acknowledges and agrees that the DMA facility provided by MEMBER is on an “as is” basis, at CLIENT’s sole risk.

18. CLIENT shall undertakes not to use or allow the use of DMA facility to engage in any form of market misconduct including insider trading and market manipulation or conduct that is otherwise in breach of applicable laws, including the applicable rules and regulations of the relevant authority.

19. CLIENT shall undertake to ensure no person authorized to place orders via DMA facility has been involved in any action by any of the regulatory authorities and convicted in any jurisdiction of any offence in relation to securities or fraud.

20. This agreement shall not be altered, amended and /or modified by the parties in a manner that shall be in contravention of any other provisions of this agreement.

21. The MEMBER and the CLIENT are aware of the provisions of Bye-Laws, Rules and Regulations of NSEIL relating to resolution of disputes/differences through the mechanism of arbitration provided by the NSEIL and agree to abide by the said provisions.

22. All trades, transactions and contracts are subject to the Bye-Laws, Rules and Regulations of the NSEIL and shall be deemed to be and shall take effect as wholly made, entered into and to be performed in the city of Mumbai and the parties to such trade shall be deemed to have submitted to the jurisdiction of the Courts in Mumbai for the purpose of giving effect to the provisions of the Byelaws, Rules and Regulations of the NSEIL.

IN WITNESS THEREOF, the parties to agreement have caused these presents to be executed as of the day and year first above written.

The Client’s Signature / The Member’s Signature /

Authorized Signatory Authorized Signatory

Signed by: Signed by:

Title: Title:

Name of the CLIENT: Name of the MEMBER:

Witness: Witness:

1. 1.

2. 2.

Annexure – E

Model DMA Member – Client Agreement

(For providing Direct Market Access facility to clients through Investment Manager)

This agreement is made at ___________ this ______ day of __________ between _________ (member of National Stock Exchange of India Ltd. with SEBI Registration No.:________), having his /her / its office / registered office at _________, hereinafter referred to as “MEMBER” (which expression shall, unless repugnant to the context or meaning thereof, be deemed to mean and include his/her heirs, executors and administrators / the partners of the said firm for the time being, the survivor or survivors of them and the heirs, executors and administrators of such last survivor / its successors and legal representatives, as the case may be) of the One Part.

And

The specific entity as stated in Annexure 1, hereinafter referred to as “CLIENT” (which expression shall, unless repugnant to the context or meaning thereof, be deemed to mean and include his /her heirs, executors and administrators /the partners for the time being of the said firm, the survivor or survivors of them and the heirs, executors and administrators of such last survivor / its successors and legal representatives, as the case may be) of the Other Part.

WITNESSTH:

Whereas the CLIENT is desirous of availing the DMA facility for the purpose of accessing the NSEIL trading system through the Member’s infrastructure.

Whereas ____________, the Investment Manager (hereinafter referred to as the “IM”) is registered/regulated*as a market intermediary and is desirous of availing the DMA facility for the purpose of accessing the NSEIL trading system through the Member’s infrastructure for executing orders. For this purpose, the IM is authorised to act for and on behalf of the CLIENT.

* Strike off whichever is not applicable