India
Financial Sector Assessment Program—Detailed Assessments Report on IOSCO Objectives and Principles of Securities Regulation

This paper discusses findings of the assessments on International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation for India. India exhibits significant progress in the implementation of the IOSCO Principles vis-à-vis the assessment concluded in 2000. The Securities and Exchange Board of India (SEBI) faces three main challenges that altogether impact the effectiveness of the supervisory programs for issuers and securities intermediaries: strengthening the supervision approach toward securities intermediaries, improving mechanisms to ensure compliance of issuers with reporting requirements, and mechanisms to ensure compliance with accounting and auditing requirements. SEBI is aware of such challenges, and some measures are currently being implemented to address them.

Abstract

This paper discusses findings of the assessments on International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation for India. India exhibits significant progress in the implementation of the IOSCO Principles vis-à-vis the assessment concluded in 2000. The Securities and Exchange Board of India (SEBI) faces three main challenges that altogether impact the effectiveness of the supervisory programs for issuers and securities intermediaries: strengthening the supervision approach toward securities intermediaries, improving mechanisms to ensure compliance of issuers with reporting requirements, and mechanisms to ensure compliance with accounting and auditing requirements. SEBI is aware of such challenges, and some measures are currently being implemented to address them.

I. Introduction

1. An assessment of the level of implementation of the IOSCO Principles in the Indian securities market was conducted from June 15 to July 1, 2011 as part of the Financial Sector Assessment Program (FSAP) by Ana Carvajal, Monetary and Capital Markets Department. An initial IOSCO assessment was conducted in 2000. Since then significant changes have taken place in the Indian market, in terms of market development, upgrading of market infrastructure and of the regulatory framework. Therefore, the need to conduct a new assessment.

II. Information and Methodology Used for the Assessment

2. The assessment was conducted based on the IOSCO Principles and Objectives of Securities Regulation and its Methodology adopted in 2003 and updated in 2008. In June 2010, IOSCO approved a revision to the IOSCO Principles, which mainly resulted in the addition of nine new Principles. However, at the time of the assessment a revised methodology had not been approved yet. As a result this assessment has been conducted based on the Principles adopted in 2003, and their corresponding methodology. Nevertheless the authorities agreed to hold exploratory discussions on the status of implementation of the new principles. A summary of such discussions is included as an Annex to this assessment. As has been the standard practice, Principle 30 is not assessed due to the existence of a separate standard for securities settlement systems. A technical note on payment issues will be delivered during this mission.

3. The IOSCO methodology requires that assessors not only look at the legal and regulatory framework in place, but at how it has been implemented in practice. The recent global financial crisis has reinforced the need for assessors to take a critical look at supervisory practices, to determine whether they are effective enough. Among others such judgment involves a review of the inspection programs for different types of intermediaries, the cycle, scope and quality of inspections as well as how the agency follow-up on findings, including the use of enforcement actions.

4. The assessor relied on: (i) a self-assessment developed by SEBI; (ii) the review of relevant laws, and other relevant documents provided by the authorities including annual reports; (iii) meetings with the Chairman of SEBI and other members of the Board, staff of SEBI as well as the RBI, and other public authorities, in particular representatives of the Ministry of Finance (MoF) and the Ministry of Corporate Affairs (MCA); as well as (iv) meetings with market participants, including issuers, brokers, merchant bankers, fund managers, stock exchanges, external auditors, credit rating agencies and law firms.

5. The assessor wants to thank SEBI for its full cooperation as well as its willingness to engage in very candid conversations regarding the regulatory and supervisory framework in India. The assessor also wants to extend her appreciation to all other public authorities and market participants with whom she met.

III. Institutional Structure

6. The regulation and supervision of the securities market in India is mainly a responsibility of the Securities and Exchange Board of India (SEBI). SEBI has been set up under the Securities and Exchange Board of India Act, 1992 (SEBI Act), with a mandate to protect the interest of investors, to regulate and to promote the development of the securities market. The responsibilities of SEBI have been stated by law, and they stem from various statutes, in particular (i) the SEBI Act; (ii) the Securities Contract (Regulation) Act, 1956 (SC(R) Act); (iii) the Depositories Act,1996; and (iv) and the companies Act, 1956 in respect of listed companies and companies proposed to be listed on the Recognized Stock Exchanges (RSEs). Based in all such statutes SEBI regulates the public offering of equity, debt and asset backed securities, as well as collective investment schemes (CIS) and the trading of securities and derivatives in recognized stock exchanges (RSEs). Finally it regulates and supervises all intermediaries in the securities market as well as infrastructures providers, including exchanges, central clearing counterparties and central securities depositories.

7. The Ministry of Corporate Affairs (MCA) and the Reserve Bank of India (RBI) have certain responsibilities in the regulation and supervision of securities markets. SEBI reviews prospectus of listed issuers and regulate listed companies in respect of issue, transfer of securities and nonpayment of dividend. The MCA has authority to register and regulate all companies (except, listed companies in respect of issue, transfer and nonpayment of dividend), and it is currently the main authority in charge of reviewing the annual financial reports (including financial statements) that all companies, including listed issuers, are required to submit pursuant to the Companies Act. The RBI has regulatory responsibility over contracts on government securities, gold related securities and money market securities and securities derived from those securities and repo contracts in debt securities. However, the execution of those contracts on exchanges is under the responsibility of SEBI.

8. Several channels have been created to foster coordination. Many of them are recent developments, and therefore are still evolving. There are coordination committees between SEBI and the RBI, and between SEBI and MCA. In addition, two committees have been constituted for purposes of dealing with financial conglomerates, with representation from SEBI, RBI and the Insurance Regulatory Development Authority (IRDA). The Financial Stability Development Council (FSDC) was created in 2010, with representation from the MoF as well as the three regulatory authorities to foster coordination on financial stability issues, as well as developmental issues. A subcommittee on inter-regulatory coordination has also been set up within the umbrella of the FSDC. Finally a joint mechanism to solve any potential difference of opinion regarding the nature of a product was created in 2010.

9. The RSEs play a key role in self-regulation. In India, RSEs are the listing authorities, and thus are in charge of monitoring issuers’ compliance with disclosure obligations. Under the listing agreement, they also operate as the primary regulator and supervisor for brokers. Finally they are in charge of real time surveillance of the markets that they operate. In practice such functions have mainly rested in the two nationwide RSEs, the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). SEBI has established several mechanisms to ensure robust oversight of the RSEs in the discharge of their self-regulatory functions. Such mechanisms include periodic reporting, as well as regular meetings on market developments, and annual on-site inspections. More recently a committee on non-compliance with listing obligations was constituted.

IV. Market Structure1

Equity markets

10. Equity markets in India have achieved an important size relative to GDP. As of June 2011, there were 5,025 listed companies in the BSE,2 and market capitalization amounted to roughly 100 percent of GDP. However, as in many other markets, market capitalization is still concentrated. As of 2011, the top 10 companies represented 31 percent of total market capitalization.

11. New listings continued to take place. During 2011, 23 new companies were listed in the BSE, compared to 80 in 2010. Fifty-eight IPOs have taken place during 2010–2011, compared to 39 in 2009–2010. Private sector companies represented the bulk of new listed companies and IPOs. A fourth of the issuances amounted to Rs. 500 crores (roughly US$108,157,135) or more.

12. Trading frequency has increased; although it is still concentrated. For 2009-2010, 3,371 shares were traded in the BSE and 1,401 at the NSE. Out of such number 2,986 and 1,301 shares were traded above 100 days. Such number of shares represented roughly 89 percent and 93 percent of the total number of shares traded in the BSE and the NSE respectively. The top 10 shares amounted to 26 percent and 23 percent of the annual cash market turnover for the NSE and the BSE respectively. For that same year, the percentage share of securities traded for less than 10 days was 4.1 percent at the BSE and 0.9 percent at the NSE

Bond markets

13. Corporate bond markets are less developed, although growing. The bulk of the debt offerings are issued as private offerings. Data is available for privately placed issues which are listed on exchanges under The Debt Regulations. In addition data is available on corporate bonds issued in dematerialized form from the depositories-CDSL and NSDL.

Table 1.

India: Corporate Bonds

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Equity derivatives markets

14. Derivatives markets have grown substantially. Over the years, the derivatives market segment has generated a turnover substantially higher than that of the cash equity market. Trading in derivatives is dominated by the NSE, which has a share of more than 99 percent of total turnover.

15. Product composition has changed in recent years. Futures in general and single stock futures used to dominate derivatives products; however for the last two years the largest share of total derivatives turnover has been contributed by index options with 45.5 percent share. In 2009–2010 index options were followed by single stock futures (29.4 percent) and index futures (22.3 percent).

Mutual funds

16. As for March 2011 there were 51 mutual funds, compared to 47 as of March 2010. Assets under management (AUM) amounted to Rs. 592,249.54 crores (US$123,927.5 million). Roughly, 70 percent of AUM was invested in debt funds—out of which 20 percent were invested in money market funds—32.98 percent in equity funds and 3.11 percent in balanced funds (mixed of equity and debt).

17. Retail investors represented roughly 97 percent of total investors’ accounts; however, they held only 40 percent of the AUM. As of August 31, 2011, there were a total of 47.07 million investor accounts in mutual funds. Corporations and other institutions on the other hand represented roughly 1 percent of total investors but held 54 percent of AUM. Foreign investors amounted to 2 percent of total accounts and hold 4.5 percent of AUM. Vis-à-vis assets classes retail investors accounted for roughly 90 percent of AUM in equity funds, while institutional investors accounted for roughly 90 percent of AUM in debt funds.

Securities intermediaries

18. As of March 2010, there were 10,203 brokers3 authorized to trade on an RSE. The majority of the brokers are licensed in both the NSE and the BSE. As per the Indian legal system, brokers can take the legal form of a corporation or can be individuals. In practice, however corporate brokers constitute 90 percent of brokers at the NSE and 82 percent at the BSE. For 2010 the top 10 brokers represented roughly 25 percent and 23 percent of annual cash market turnover of the NSE and the BSE, respectively. Many brokers engage in proprietary trading. For 2010 proprietary trading represented roughly 26 percent and 23 percent of the annual cash market turnover for the NSE and the BSE respectively. As per information provided by SEBI, brokers fund their proprietary trading activities mostly with own funds, and leverage is not common.

19. In addition there were 192 merchant bankers and three underwriters registered with SEBI. In practice most merchant bankers are also registered as underwriters, thus the limited number of “stand-alone” underwriters. Book building is the preferred mechanism for placement, and issues are usually oversubscribed. As a result the exposure of merchant bankers/underwriters is usually limited. Such exposure is further limited by regulations, since qualified institutional investors are not allowed to walk away from their expressions of interest. Thus, in practice the obligation of the underwriters is often limited to (a) a 5 percent portion that they are required to retain by regulation (“skin on the game”); and (b) filling any gap resulting from retail investors who withdraw their applications. As per information provided by SEBI, merchant bankers fund their obligations mostly with own funds, and leverage is not common either.

20. There were also 267 portfolio managers registered with SEBI. Portfolio managers are only authorized to manage individual accounts, and they cannot pool the money of investors. The bulk of accounts are discretionary. As of March 2011, AUM by portfolio managers amounted to Rs. 295,435.80 crores compared to Rs. 282,720.75 crores as of March 2010.

Market infrastructure

21. There are 21 RSEs; however, equity markets listing and secondary market trading are concentrated in the BSE and the NSE. Both RSEs operate anonymous order driven systems and settlement takes place on a t+2 basis.

22. Clearing in both the NSE and the BSE is done through central clearing counterparties (CCPs). In the case of the NSE, the National Securities Clearing Corporation (NSCCL), a wholly owned subsidiary of the NSE, performs CCP services. In such capacity it handles the risk management function (including margins and settlement guarantee fund). In the case of the BSE, the Bank of India Shareholding Limited (BOISL) facilitates the settlement process of the equity cash segment and delivery based stock derivatives by coordinating with the clearing banks and depositories as per the directions of the exchange. Accordingly, BOISL process the pay-in and pay-out for such segment based on the input files received from the exchange, the clearing banks and depositories. However, BSE Ltd. acts as the central counterparty and guarantees the settlement for such segments. Thus, BSE Ltd. manages the settlement guarantee fund and handles the risk management functions (collateral management, margins, etc.) and overall settlement process. The Indian Clearing Corporation Limited (ICCL) handles the mutual fund segment and the corporate bond segment of BSE Ltd., and currency derivatives segment of the United Stock Exchange of India Ltd. BOISL is a joint venture company of Bank of India (51 percent holding) and BSE Ltd. (49 percent holding). ICCL is a wholly owned subsidiary of BSE Ltd.

V. Preconditions for Effective Securities Regulation

23. A few general preconditions for the effective regulation of securities markets requires further strengthening. There are no significant barriers to entry and exit for market participants. Foreign ownership of securities intermediaries is allowed, but investment by foreign investors in Indian issuers and mutual funds must be done through FIIs, which are required to register with SEBI. Since August 2011, SEBI has allowed foreign investors who meet “know your customer” requirements to invest in equity and debt schemes of mutual funds. The Companies Act contains a basic framework for the constitution and operation of corporations that has served the country well but could usefully be updated. In particular, market participants commented that the insolvency regime requires a major overhaul since protracted insolvency proceedings are mentioned as a key weakness of the system. The authorities informed that a Companies Bill 2011 has already been tabled in parliament. Criminal enforcement in the courts is also a challenge, with protracted procedures mentioned as the main problem. The country is moving toward convergence with (rather than adoption of) IFRS. IFRS equivalent standards have been notified by the central government and ICAI has suggested April 2013 for implementation. Some differences with IFRS remain, and the authorities’ intention is to initiate a dialogue with the International Accounting Standards Board to address such differences. Market participants expressed concerns about the taxation framework, in particular the existence of a securities transaction tax with different percentages for different asset classes, which can distort the natural development of the markets. The authorities informed that the MoF has initiated a review of such tax with a view toward rationalization of securities transaction tax percentages. Finally, there are general concerns about the level of corruption in the country. The creation of an independent anticorruption agency is currently being discussed in parliament.

VI. Main Findings

24. Principles for the regulator (1–5): SEBI‘s responsibilities are clearly established by law. Several mechanisms have been developed to foster coordination among SEBI and other domestic authorities. Many of them are of recent creation and therefore still evolving. In practice, SEBI has acted with a high degree of independence from both governmental and commercial interest. SEBI has broad licensing, supervision, investigation, and enforcement powers. SEBI faces challenges in regard to the number of staff vis-à-vis the size of the market, as well as its capacity to hire personnel with market experience, especially at the senior level. The development of regulations is subject to public consultation. Licensing requirements are established by regulations which are all available in SEBI’s website. Parties affected by a decision of SEBI have a right to appeal. There is a code of conduct for staff that includes provisions on use of information, transactions in securities, gifts, and cool-off periods. There are separate provisions for Board members.

25. Principles for enforcement (8–10): SEBI has broad authority to request information, testimony, and conduct inspections on regulated entities. SEBI also has broad authority to request information and testimony from third parties. SEBI has broad enforcement powers over both regulated entities and third parties. It can impose a wide range of measures and sanctions including cease and desist orders, money penalties, and disgorgement. Onsite inspection plans require further strengthening, in particular for securities intermediaries, and so does enforcement of listing obligations by issuers and of accounting and auditing standards. While the law provides for strong criminal penalties, in practice effective criminal enforcement has focused on CIS cases.

26. Principles for cooperation (11–13): SEBI’s Act provides SEBI with the authority to cooperate and share public and nonpublic information with domestic and foreign authorities, without limitations. SEBI is signatory of the IOSCO MMOU and several bilateral MOUs, and has demonstrated that in practice it cooperates effectively with other foreign regulators.

27. Principle for issuers (14–16): Public offering of securities is subject to disclosure requirements, mainly in the form of a prospectus the content of which is broadly in line with the IOSCO principles. SEBI reviews all prospectuses of equity issuers, and the RSEs review those of debt issuers. There are periodic requirements on listed companies, including to promptly disclose material events. Mechanisms to ensure compliance with listing obligations, which include periodic reporting, are a responsibility of the RSEs. Such mechanisms have limitations. A committee on noncompliance of listing agreement has recently been set up to address this issue. Issuers are required to submit their financial statements according to local accounting standards, and auditors are required to conduct their audits based on local auditing standards. Current mechanisms to ensure compliance with accounting and auditing standards including auditors’ independence have limitations.

28. Principles for collective investment schemes (17–20): There are robust registration requirements for sponsors and the asset management companies that manage mutual funds. Individuals who want to sell CIS are subject to a certification process. Mutual funds and asset management companies are subject to offsite reporting. Starting in 2011/12, SEBI has enhanced its supervisory approach whereby inspections are carried out directly by SEBI staff under a risk-based approach, and thematic inspections are becoming an integral part of the supervisory plan. Asset management companies must submit a prospectus for every mutual fund scheme that they want to manage, the content of which is broadly in line with the IOSCO principles. Assets of mutual funds must be entrusted to an independent custodian. There are clear rules on valuation, including detailed guidelines for valuation of illiquid securities. In the case of debt, assets must be valued using the prices provided by independent third parties. Asset management companies are responsible to investors for errors in valuation.

29. Principles for market intermediaries (21–24): There are robust registration requirements for all types of securities intermediaries. However in the case of brokers, the RSEs do not conduct visits in connection with registration. Portfolio managers have not been subject to regular inspections but are subject to inspection every three years upon renewal of registration, and only this year SEBI implemented a more comprehensive inspection program for merchant banks. For all types of intermediaries inspections have been compliance based, and follow up of findings of inspections reports should be strengthened. All types of intermediaries except merchant banks and underwriters must submit semiannual audits of their internal controls and risk management systems. All types of intermediaries must appoint compliance officers. The RSEs have established early warning mechanisms for brokers as well as detailed provisions to deal with their failure.

30. Principles for secondary markets (25–30): Only RSEs can operate in India, subject to recognition by SEBI. Recognition requirements are robust and include economic resources and certifications of IT systems, among others. The RSEs have established robust mechanisms for market surveillance, which are complemented by SEBI’s own surveillance system. Market manipulation, insider trading, and other unfair practices constitute both civil infractions and criminal offenses. The RSEs have robust mechanisms to monitor large exposures by members. A system of Market-Wide Circuit Breakers and Securities Level Price Bands has been put in place.

Table 2.

India: Summary Implementation of the IOSCO Principles and Objectives of Securities Regulation

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VII. Recommended Action Plan and Authorities’ Response

Table 3.

India: Recommended Action Plan to Improve Implementation of the IOSCO Principles

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Authorities’ response to the assessment

31. SEBI would like to appreciate the effort and time that is put in by IMF and World Bank team to assess the Indian securities markets. The IMF and World Bank assessment recognizes that the regulatory and supervisory regime for securities market is well developed and largely in compliance with international standards. We see from the report that assessor has also applied higher standards than which is given in IOSCO Principles. We are grateful for the opportunity to provide the following comments regarding the FSAP report.

32. The report recognizes that SEBI has built the reputation of a credible enforcement agency. In the report, it has been suggested that the SEBI should focus on the strengthening of the supervision of securities market intermediaries including fund managers. One of the challenges faced by the authorities is the sheer number of the intermediaries operating in the securities market such as brokers (19,557), sub-brokers (78,228), foreign institutional investors (1,767), merchant bankers (199), portfolio managers (246), custodians (19), depository participants (823), etc., as on December 2011. Onsite inspections of brokers are primarily a responsibility of the RSEs. The RSEs have developed a risk based approach to determine the intensity of the inspections. To this end, brokers have been divided in three categories based on a set of criteria that includes among others trading volume, number of clients, funds settled and number of complaints. The enforcement actions taken by regulator are very high compared to other jurisdictions. During 2010–2011 the total numbers of enforcement actions initiated were 958 and the total number of enforcement actions disposed was 1,803. Further, the total number of half-yearly internal audit reports by the brokers that have to be submitted are 979 for BSE and 1,212 for NSE as on March 31, 2011.

33. In respect of mutual funds, SEBI has laid down two-tier supervision system. At the first level by the trustees of mutual funds which supervise the day-to-day operations of mutual funds and compliance with the regulations, investment restrictions and objectives in the scheme document by the asset management company. The comprehensive guidelines for mutual funds are issued by SEBI (i.e., SEBI (Mutual Fund) Regulations, 1996 and circulars issued there under) to provide that mutual funds shall be authorized and registered for business by SEBI. The asset management company has to keep minimum net worth not less than Rs 10 cores. The asset management companies are required to periodically report regarding its operations/activities and make such disclosures to SEBI as may be called upon. As per the extant policy of SEBI regarding inspection of mutual funds, a more risk-based approach has been adopted. The inspections are undertaken based on assets under management and other factors including number of complaints received against the mutual fund. Inspections are also done on discretionary basis based on issues identified in previous inspection reports or regulatory filings.

34. The assessment also suggests for developing better mechanism to ensure better auditing and accounting standards. The provision of the Companies Act and Chartered Accountants Act provide a framework to maintain objectivity and integrity of accounting and audit. The government has created Quality Review Board for reviewing the quality of auditors which is already in operation. During the Satyam scam in 2009, SEBI also conducted peer review on the audits of top 50 companies. The new Companies Bill, 2011 placed before the parliament on December 14, 2011contains provisions for establishment of an independent agency, National Financial Reporting Authority, to oversee the functions of Auditors (Clause 132 of the Bill). National Financial Reporting Authority (NFRA) will ensure scrutiny and compliance of accounting and auditing standards. NFRA is independent of audit professionals. It will also ensure quality of service of professionals associated with compliance and monitoring of corporate financial management. NFRA will have quasi-judicial powers to levy penalty for misconduct on auditors, etc. It can order investigation, levy penalty, and bar professionals from practice in case of their indulgence in professional or other misconduct. A review of the compliance of the corporate governance norms was carried out based on the reports filed by the listed companies, during the period January 2006 to March 2007, at BSE and NSE. Based on the identified criteria adjudication proceedings were initiated against five public sector undertakings and 15 private sector companies.

35. India is one of the first countries in the world where the first demutualised exchanges were set up. The NSE started functioning as demutualised stock exchange in November 1994. Subsequently, the BSE was also demutualised in the year 2004. These exchanges are managed by professionals who are independent of members as well as shareholders. The demutualised and for-profit exchanges have their own challenges such as discharging regulatory functions in respect of members and market by exchanges that are commercial entity and may be listed in stock exchanges. Normally surveillance is conducted by the exchanges. However, in India SEBI has also setup Integrated Market Surveillance System, which generates alerts arising out of unusual market movements. The Integrated Market Surveillance System provides assistance to SEBI in monitoring the market and in discharging its regulatory functions effectively. The system is being used for detecting aberrations, analyzing them and identifying the cases for investigation and for taking further action, wherever warranted. It is also being used for monitoring the activities of market participants as well as issuing suitable instructions to stock exchanges and market participants. Wherever required, findings enabled by the Integrated Market Surveillance System are shared with stock exchanges for appropriate action ensuring that stock exchanges continue to act as the first level regulator for proactively detecting and examining abnormal trading pattern. SEBI has constituted a committee under the chairmanship of Dr. Bimal Jalan, former Governor of RBI, on February 8, 2010 to examine issues arising from the ownership, governance and listing of stock exchanges. The committee submitted its report on November 23, 2010 which is under consideration of SEBI.

36. As regards criminal enforcement, India being a democratic country follows criminal justice system where a person is treated as innocent till he is proved guilty. The enforcement agency has to prove the guilt of the person beyond reasonable doubt and the standard of proof is very high. The civil/criminal courts cases pending are 59 as on March 31, 2011.

37. The Principle 10 assesses the effective and credible use of inspection or enforcement powers. It is observed that the assessor while assessing the overall effective and credible use of inspection and enforcement powers has given their rating in Principle 10. In addition, it is observed that the element of inspection and enforcement powers has also been again taken into consideration while giving rating for purpose of Principles 14, 16, 17, 21, and 28. It is for consideration whether the Principles such as 14, 16, 17, 21, and 28 should be primarily assessed as per the principle on the key questions for each of such principle or need to be rated or judged on basis of adequacy or effectiveness of enforcement for which a separate principle has been earmarked.

38. All the intermediaries who operate in the Indian securities market are mainly engaged in fee-based activities. These are intermediaries or pass-through entities and the risk is mainly borne by the investors. SEBI has specified both initial and continuing minimum net worth requirements for the various intermediaries. In case of trading by any client or fund-based activity by an intermediary such as broker who engages in proprietary trading, they have to bring margins (i.e., initial margins, extreme loss margins, and mark-to-market losses) or additional deposit depending on exposure or risk and are subject to monitoring and risk management by the stock exchanges. The observations that there is no additional requirement to adjust by risk fail to take into account the business model and the risk management system adopted by the stock exchange. SEBI has specified a comprehensive risk management framework to be followed by the stock exchanges the salient provisions of which include categorization of securities for imposition of margins into groups based on liquidity and volatility of the scrip, as also adjustment of margins from the liquid assets deposited by members. Detailed Assessment

VIII. Detailed Assessment

Table 4.

India: Detailed Assessment of Implementation of the IOSCO Principles

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