In exercise of the power conferred by section 34 (1) of the Securities and Exchange Ordinance, 1969 (XVII of 1969), the Chittagong Stock Exchange Ltd. makes, with the prior approval of the Securities and Exchange Commission, the following regulations, namely: -
1. Short title and extent of applicability:
- These regulations may be called the Chittagong Stock Exchange (Internet Based Trading Services) Regulations, 2002.
- These regulations shall apply to all members of the Chittagong Stock Exchange Ltd. and their authorised representatives who are permitted to provide internet-based trading services to their clients under these Regulations for trading in the listed securities, as may be determined by SEC from time to time, for trading through ITS.
2. Definitions
- (1) In these Regulations, unless there is anything repugnant in the subject or context:-
- ‘Board’ means the Board of Directors of the Exchange;
- ‘CSE’ or ‘Exchange’ means the Chittagong Stock Exchange Ltd;
- ‘Designated Client’ or ‘ITS Client’ means the customer of a permitted member who opens special account with the member as per Annexure-B to use ITS of CSE;
- ‘Internet Based Trading Services’ or ‘ITS’ means the services provided by the Chittagong Stock Exchange Ltd. to its registered Stock Dealers/Stock Brokers for transmitting the designated clients’ validated orders to CSE’s main trading system through an automated order routing system, using the client’s own password, for execution of trade of the said client;
Provided, CSE shall ensure that the provision of Section 8, sub-section (1) of the Securities and Exchange Ordinance, 1969 is not contravened in this respect;
- ‘Member’ means a member of the Exchange;
- ‘Permitted member’ means a member of the Exchange who gets the permission from the Exchange to provide the ITS to its clients;
- ‘SEC’ or ‘Commission’ means the Securities and Exchange Commission.
- Words and expressions used but not defined shall have the same meanings as are assigned thereto in the Securities and Exchange Ordinance, 1969 (XVII of 1969), the Securities and Exchange Commission Act, 1993 (XV of 1993), the Depository Act, 1999, the Companies Act, 1994, the Securities and Exchange Commission (Stock Dealer, Stock Broker and Authorised Representative) Rules, 2000, the Securities and Exchange Rules, 1987, the Chittagong Stock Exchange Trading Regulations, 1998, and rules, regulations and notifications issued under the aforesaid Ordinance and Acts.
3. Eligibility for Providing Internet Based Trading Services (ITS):
A member shall be eligible to provide Internet Based Trading Services subject to the following conditions:-
- It is a registered Stock Dealer or Stock Broker.
- It, at all time, maintains the net capital, the risk-based capital adequacy as determined by the Securities and Exchange Rules, 1987, and the net worth (excluding goodwill and fictitious assets) of Tk. 10 lac, or such amount as required by the Securities and Exchange Commission (Stock Dealer, Stock Broker & Authorised Representative), Rules, 2000, whichever is higher.
- It has no record of settlement failure, or to fulfil its obligation to its client, the Exchange or other members, or of any disciplinary action taken against him in the last one year.
- It provides safe keeping services for the ITS clients’ security certificates and separate bank account for the ITS client’s money with effective means of security, reliability and confidentiality.
- It maintains adequate computers and equipment including back up facilities for power supply and data storage capacity. It also has adequate system capacity for handling data transfer and arranges for alternative means of communication in case of internet link failure.
- It has appointed Compliance Authority and appropriate number of Authorized Representatives as per the Securities and Exchange Commission (Stock Dealer, Stock Broker and Authorised Representative) Rules, 2000, competent to operate, control and monitor internet transactions and render client services as per the rules, regulations, notifications, etc.
- It shall not allow anybody to use ITS unless a Special Account is opened by the ITS Client fulfilling the prescribed account opening form (Annexure-B) and other requirements for the Internet Based Trading Services.
- It confirms CSE that it shall enter into written agreements with the ITS Clients concerned as per Annexure-C for providing ITS, and shall submit attested copies thereof simultaneously to CSE and SEC immediately after execution.
- It shall prominently display the names, registered numbers, license issue date and license expiry date in the web site.
- It shall ensure through web site or otherwise the dissemination of information meant for investors’ protection, the rules and regulations affecting client-broker relationship, complaints, arbitration and settlement procedures, investors protection rules, etc.
- It has sufficient verifiable information about clients and their introducers, including their geographic locations, to facilitate risk evaluation of clients.
- It ensures that, in addition to other mode, it shall send confirmation note to the clients through e-mail at the time specified in the relevant rules and regulations.
- It ensures proper risk management and shall be responsible for settlement of each and every trade executed through ITS.
- It agrees that an audit firm authorised by the Exchange only shall audit their accounts. The Exchange will publish a list of recommended auditors for the purpose.
- It agrees that it shall make periodic reporting to CSE and SEC, as specified by CSE/SEC.
4. Application for permission to operate ITS:
A member fulfilling the eligibility requirements mentioned in regulation 3 may apply to CSE in the format at Annexure-A for permission to operate Internet Based Trading Services for its designated clients. The member shall also provide further information or document as the CSE may require for disposal of the application.
- The Board shall grant written approval or reject the application in writing mentioning the reasons thereof, as the case may be, within 30 calendar days of the date of application properly submitted to the Exchange, and the decision of the Board shall be communicated to the applicant immediately thereafter, endorsing copy thereof to SEC.
- It shall deposit with the Exchange the requisite fee for installation and maintenance of the system after obtaining the permission. The Board, or its delegated Committee, will decide the amount of the installation and maintenance fees from time to time.
5. Placing and validation of orders of the designated clients:
- The designated clients only having valid Special Account and Agreement with the permitted member as per the regulations shall be eligible to place order through the ITS.
- Every client shall use the User-id and the password to access the ITS module.
- The password shall be the key to the access and that respective client shall be liable for any misuse of the password. Any person of the permitted member found responsible for misuse of the password shall be prosecuted under appropriate laws, rules and regulations.
- The permitted member shall be responsible for setting the limit for trade for each designated client for both scrip and money. If the order is within the limit, it will be automatically routed to the CSE’s main trading system for matching according to set algorithm. Any error or omission shall not indemnify the permitted member from the responsibility of settling any trade validated against wrongly set limit or otherwise.
- In case of margin arrangement between the designated client and the permitted member, the limit set by the member for the client shall also commensurate with the Margin Rules, 1999.
- The system will accept Limit Orders only.
- Orders placed through the system and confirmation notes generated automatically will not need any manual signature.
6. Continuous compliance of rules and regulations:
- The permitted member shall ensure adherence to all the rules and regulations set by the Commission and the Exchange in respect of trading, settlement and other rules and regulations. All requirements, conditions, procedures, obligations of the dealer and broker in vogue shall be applicable.
- The permitted member and the CSE shall ensure that ITS is not used for cross trades by the designated client himself.
7. Suspension and cancellation of the permission for providing ITS:
- The Exchange or SEC may suspend the permission given to a member for providing facilities of ITS if it violates any of these regulations, and that the suspension will continue until and unless the member complies with the regulations it violated in the manner prescribed by the Exchange or SEC, as the case may be.
- The Exchange or SEC may cancel such permission if suspension continues for 15 days. The member may be given a seven days notice before proceeding for cancellation of the permission given to the permitted member for providing facilities of ITS.
- The member may appeal to the Board, or to the Commission through CSE, as the case may be, for revival of the permission to provide the facilities of ITS.
8. CSE obligations in respect of risk management for ITS:
- CSE shall ensure that –
- records maintained in electronic form by the permitted members are not susceptible to manipulations;
- the permitted members duly adhere to the uniform written procedures prescribed by CSE to handle contingency situations and for review of incoming and outgoing electronic correspondence;
- facilities for on-line registration of complaints by the designated clients on web-sites of CSE, and the permitted members, if available, are properly maintained;
- the permitted members have system-based control on the trading limits of the designated clients, and exposures taken by the clients, and also that there are predefined limits on the exposures and turnover of each client; and
- the members ITS systems are capable of assessing the risks of the clients as soon as the orders come in.
- CSE shall also ensure that the following security measures are made mandatory-
- User id;
- First Level Password (Private Code);
- Automatic expiry of passwords at the end of a reasonable duration;
- Reinitialise access on entering fresh passwords;
- All transaction logs with proper audit facilities are maintained in the system;
- Suitable firewalls between trading set-up directly connected to CSE trading system and the internet trading set-up are maintained;
- All permitted members follow similar logic/priorities to treat client orders and maintain all activities/alert logs with audit trail facilities; and
- The permitted members’ web server, if applicable, have internally generated unique numbering for all-client orders/trades.
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