client code modification - error policy - Systematix Shares

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CLIENT CODE MODIFICATION - ERROR POLICY

Policy reviewed by:

Compliance and Operations team

Policy reviewed on:

August 31 2015

Approval Authority:

Board of Directors/Executive Committee

Policy approved on:

November 05 2015

1. OBJECTIVE The main objective of the policy is to deal with modification of client code after the execution of trade and to create an awareness amongst the relevant staff such as dealers at PCG desk, Institution desk (Equity segment only), HO dealing, branches, Franchisees. This policy has been prepared for both Systematix Shares & Stocks (I) Limited wherein we are the members of BSE/NSE/MCX-SX and Systematix Commodities Services Private Limited wherein we are the members of MCX/NCDEX. 2. BACKGROUND EQUITY BROKING SEBI vide its circular no. CIR/DNPD/6/2011 dated July 5, 2011 and National Stock Exchange vide circular nos. NSE/INVG/2011/18281 dated July 5, 2011, NSE/INVG/2011/18484 dated July 29, 2011 and NSE/INVG/2011/18716 dated August 26, 2011 and BSE Ltd. vide its circular no. 20110706-1 dated July 06, 2011 and no. 20110729-24 dated July 29, 2011 and 20110826-4 dated Aug 26, 2011 directed that modifications of client codes of non-institutional trades are done only to rectify a genuine error in entry of client code at the time of placing / modifying the related order. As per the above mentioned circulars, the Stock Exchanges shall levy penalty to us for Client Code Modification as per the calculation given below and transfer the amount to its Investor Protection Fund. ‘a’ as % of ‘b’

Penalty as % of ‘a’

≤5

1

>5

2

Where, a = Value (turnover) of non-institutional trades where client codes have been modified by a trading member in a segment during a month. b = Value (turnover) of non-institutional trades of the trading member in the segment during the month. Accordingly, for the client code modification done on the Exchange system, the Exchange penalises as per SEBI defined penalty structure. and in addition, the Stock Exchanges have been directed to conduct a special inspection to ascertain whether the modifications of client codes are being carried on as per the strict objective criteria set by the Stock Exchange, if ‘a’ as % of ‘b’, as defined above, exceeds 1% during a month and take appropriate disciplinary action, if any deficiency is observed.

COMMODITY BROKING FMC vide its circular no. FMC/2/2011/C/0032 dated December 26, 2011 and FMC/2/2011/C/0011 dated September 28, 2011 and Multi Commodity Exchange of India Ltd. vide its circular no. MCX/T&S/489/2011 dated December 29, 2011 and MCX/T&S/343/2011 dated September 30, 2011 and National Commodity Exchange of India Ltd. vide its circular no. NCDEX/TRADING-139/2011/374 dated December 27, 2011 and NCDEX/TRADING-111/2011/301 dated September 30, 2011 directed that Client code modification facility is allowed only for carrying out correction of genuine punching error(s) in the client code. As per the above mentioned circulars, the Commodity Exchanges shall levy penalty to us for Client Code Modification as per the calculation given below ‘a’ as % of ‘b’

Penalty as % of ‘a’

≤5

1% (subject to a minimum of Rs. 5,000/-)

>5

2% (subject to a minimum of Rs. 5,000/-)

Where a = Value (turnover) of trades in respect of which client codes have been modified by a trading member during a day. b = Value (turnover) of trades of the trading member during that day. 3. TERMS USED IN THIS POLICY 1. Genuine errors : Errors due to communication and/or punching or typing such that the original client/code/name and the modified client code/name are similar to each other and modification within relatives (‘Relative’ for this purpose would mean “Relative: as defined under the Companies Act, 1956) Example of Genuine Error: Client code FA 1234 wrongly entered MN5678 would be constructed as intentionally committed whereas FA1234 entered as AF 1234 or FA 2341 may be a genuine punching error. 2. Modification of client codes: Modification in client codes due to genuine errors (Institutional or non institutional) to the Error Account, which are subsequently liquidated/closed out, in the error account to the extent possible. 4. REQUIREMENTS AND PROCESS FLOW 1. Error account is opened in the nomenclature “Error” and accordingly UCC uploaded for the same to the Exchanges. 2. The modification of client code is to be done only in exceptional cases and not in routine case. 3. Any trade will be modified (institutional or non institutional) either to the correct client code or to the Error Account. In case the trade is modified to the Error account then in such case the position to be liquidated/closed out in the market in the error account to the extent possible.

4. Dealers to report the error trades immediately to their dealing head/ head of department. 5. Dealing head/ head of department to evaluate the error trades and arrange for submission of the requests as in the prescribed formats under the approval criteria as detailed below. 6. The PCG/Retail desk would submit the duly filled and approved prescribed format to the Operations /RMS for further processing. Likewise, Institution desk would submit request to the institution operations team for further processing. 7. The open position to be liquidated in Error code only. 8. If the said position is transferred to the correct client code or has not been able to liquidate in Error code due to upper/lower freeze, fall under the category of compulsory settlement by delivery or any other reason than such trade will be modified to correct client code directly. In this case penalty which is imposed by the Exchange for the non institutional codes, same shall be transferred to client account. In case the client does not accept the penalty the same may be debited to the dealers responsible for the error, unless the same is exempted under management approval. 9. The Compliance Officer shall review the details of the Error files send by the Exchanges and Error account of the company and report to the Designated Director on the same day or within next working day, all trades which has been moved to the Error account. 10. Operations team to analyze the code changes for all the instances for the following: a. Genuineness of code modifications, b. Verify for patterns which indicates the intention to adversely impact one investor over other by transferring profits/ losses to/from specific codes. c. Number of instances of the code modifications occurred by the same dealer visa vis the trade value, profit/loss incurred d. Number of instances occurred for the same set of clients/group visa vis the trade value, profit/loss incurred 11. The Operations team need to maintain an MIS in the prescribed format or as amended from to time and report to the Designated Director on periodical basis (monthly) or as decided from time to time. 5. REPORTING CRITERIA Following are the criteria based on which approvals are required to be taken for trades done in ERROR account. FOR PCG DEALING DESK Criteria for each instance

Approval of Head of Department

Approval of Head of Operations

Approval of Designated Director

Duly approved details to be sent to

In case P&L < = Rs. 1,000

Yes

No

No

EDP, RMS & Compliance

(As on date Nitesh

Khandelwal) In case of P&L > = Rs 1000 < = 5000

Yes, As on date Nitesh Khandelwal and Rajeev Bajaj jointly)

Yes

No

EDP, RMS & Compliance

In case of P&L > = Rs. 5000

Yes

Yes

Yes

EDP, RMS & Compliance

Criteria for each instance

Approval of Head of Department

Approval of Head of Operations

Approval of Designated Director

Duly approved details to be sent to

In case P&L <= Rs. 1,000

Yes

Yes

No

EDP, RMS & Compliance

In case of P&L> = Rs. 1,000

Yes

Yes

Yes

EDP, RMS & Compliance

FOR RETAIL DEALING DESK

FOR INSTITUTION DESK Criteria for each instance

Approval of Approval of Head of Director Department

Duly approved details to be sent to

In case P&L <= Rs. 5,000

Yes

No

EDP, RMS & Compliance

In case of P&L > Rs. 5000

Yes

Yes

EDP, RMS & Compliance

DEALING WITH TRADES FOR PCG DESK The following additional criteria for dealing of losses occurred due to error while executing the trades which would be applied to the PCG dealing desk. This would be exclusive and independent of the reporting criteria as defined above. Criteria for dealing of Losses

Approval Required

Limit : 1% the total PCG Brokerage income generated in a month

HOD

Sub limit : 1% of the PCG brokerage generated from the clients handled by the respective PCG dealer, in a month

HOD

In case within “Limit” but outside the range of “Sub limit”

HOD and Sh Rajeev Bajaj

The losses beyond the limits as prescribed above and not approved by HOD, has to be borne by the respective dealer. In case where salary is linked to performance, the above criteria would be applicable and the losses would be deducted from the revenue sharing. The above criteria or prescribed limits which to be used by HOD at their discretion after proper due diligence on case to case basis. This being a privilege to the PCG dealers and thus cannot be construed as a right. The HOD reserves the right, not to exercise this option, in case of any repeated trend or rampant errors observed. 6. REVIEW POLICY This policy may be reviewed as and when there are any changes introduced by any statutory authority or as and when it is found necessary to change the policy due to business needs and would be placed before the Board/Executive committee for their review and approval. 7. POLICY COMMUNICATION A copy of this policy shall be made available to all the relevant staff and updated on our website. 8. APPLICABILITY This is applicable from immediate effect. 9. REFERENCE TO THE CIRCULARS EQUITY SEGMENT SEBI Circulars No.- CIR/DNPD/01/2011 dated July 05, 2011 NSE Circular No. - NSE/INVG/2011/596 dated February 17, 2011 NSE Circular No.- NSE/INVG/2011/18484 dated July 29, 2011 NSE Circular No. - NSE /INVG/2011/870 dated August 26, 2011 BSE Circular No - 20110706-1 dated July 06, 2011 BSE Circular No. 20110729-24 dated July 29, 2011 BSE Circular No. 20110826-4 dated Aug 26, 2011

COMMODITY SEGMENT FMC Circulars No.- FMC/2/2011/C/0032 dated December 26, 2011 FMC Circular No.: FMC/2/2011/C/0011 dated September 28, 2011 MCX – Circular No : MCX/T&S/489/2011 dated December 29, 2011 MCX Circular No.: MCX/T&S/343/2011 dated September 30, 2011 NCDEX – Circular No : NCDEX/TRADING-139/2011/374 dated December 27, 2011 NCDEX Circular No.: NCDEX/TRADING-111/2011/301 dated September 30, 2011

10. FORMAT OF APPROVAL OF CODE MODIFICATIONS

Annexure 1 - Format of approval of PCG & Retail desk SYSTEMATIX SHARES AND STOCKS (I) LTD Kind Attn : RMS Head Mail ID :[email protected] , [email protected]; [email protected]; [email protected]

Date Branch Trade change/Modification Request Form

Seg men t

Order No

Trade No

Scrip Code (cash )/ Expir y date (FO)

S c ri p N a m e

Q t y

Rate

Buy/ Sell

Wrong Client Code

Wro ng Clien t Nam e

Corr ect Clie nt Cod e

Correct Client Name

User id

ERROR

Name of Dealer

Approved By HOD

Approved By CEO (*)

RMS Head

Operation Head

Signature Name

Signature Name

Signature Name

Signature Name

Signature Name

(*) Only if P/L exceeds the prescribed limits

Passw ord

App rox P/L for

Tota l No of Trad es to be Mo difie d

Tota l No of Ord ers to be Mo difie d

Reason for Modific ation

Annexure 2 - Format of approval of Institution desk SYSTEMATIX SHARES AND STOCKS (I) LTD Segment

Scrip Name

Qty

Rate

Buy/Sell Wrong Wrong Client Name Correct Client Client Code Code

Name of Dealer

Approved By HOD

Approved By Director (*)

Signature Name

Signature Name

Signature Name

(*) Only if P/L exceeds the prescribed limits

Correct Client Name

Reason for Modification

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client code modification - error policy - Systematix Shares

CLIENT CODE MODIFICATION - ERROR POLICY Policy reviewed by: Compliance and Operations team Policy reviewed on: August 31 2015 Approval Authority:...

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