RULES & REGULATIONS

SETTLEMENT OF CHITTAGONG STOCK EXCHANGE TRANSACTIONS REGULATIONS, 2005

In exercise of the powers conferred by section 34(1) of the Securities and Exchange Ordinance, 1969(XVII of 1969) Chittagong Stock Exchange Ltd. with prior approval of the Securities and Exchange Commission is pleased to make the Settlement of Chittagong Stock Exchange Transactions Regulations 2005 (replacing the Settlement of Stock Exchange Transactions Regulations, 1998) which is as under:

Settlement of Chittagong Stock Exchange Transactions Regulations, 2005

1. Short Title - These regulations may be called the Settlement of Chittagong Stock Exchange Transactions Regulations, 2005

2. Definitions - In these regulations, unless the context otherwise requires: 

1. “Adjusted due balance mechanism” means the mechanism used by the Clearing House to ascertain the amount receivable from/payable to every member by adjusting the  total buy with the total sell of the securities traded on a trading day;
2. “Commission” or “SEC” means Securities and Exchange Commission;
3. "CSE" or “Exchange” means Chittagong Stock Exchange Ltd.;
4. "Clearing House" means the facilities provided by CSE to operate as a center for the clearing and settlement of securities traded in the Exchange;
5. "Contract " means a contract of transaction executed between the Buying Member and the Selling Member in the trading system of CSE;
6. “Depository” means the Depository System providing company registered by the SEC;
7. “Clearing Account” means account as defined in the Depository Bye Laws;
8. “Default” means failure by member to perform a task or fulfill its settlement obligation;
9. “Eligible Securities“ means securities as defined in the Depositories Act, 1999;
10. "Member" means Member of CSE who is registered as the Stock-broker/dealer by the Securities and Exchange Commission.;
11. “Pay in Day” means the day specified in the ‘Guidelines’ on which the member deliver securities and/or cheques/pay order/demand draft for the purpose of settlement of the transaction it carried out on each trading day according to the Settlement Obligation Statement;
12. “Pay out Day” means the day specified in the ‘Guidelines’ on which the member shall receive securities and money for the purpose of settlement of the transaction it carried out on each trading day according to the Settlement Obligation Statement;
13. “Record Date” is the date fixed by the issuer of eligible securities
    for taking a record of the name of its shareholders or debenture holders or any other security holders for the purpose for which record is to be taken;
14. “Settlement Obligation Statement” means the Statement
    prepared by the Clearing House from the processing of information in respect of the transaction carried out by Member on each trading day;
15. “Settlement” means the exchange of securities and money in
    completion of trades in securities on a trading day through the facilities of the Clearing House in accordance with this regulations;
16. “Short selling” means the sale of the security which a member does not either own in his own account or possess for the account of his client at the time of sale;
17. “Trading day” means the specific day on which transactions are carried out by the members in CSE i.e.(T+0);
18. “Trade for Trade” means a mechanism for settlement of individual transactions separately between counter parties through the Clearing house;
19. “Guidelines” means guidelines, approved by the Commission for the purpose of these regulations and the said Guidelines does not require gazette notification. Any amendment to the guidelines will require prior approval of the 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, the Depository Act, 1999, the Companies Act, 1994 and rules, regulations and notifications issued under the aforesaid Ordinance and Acts.

3 Contract Note: All transactions carried out in CSE shall be evidenced by a computerised contract note having a contract number with date of execution of trade as prepared automatically through the CSE automated trading system immediately upon completion of trade in CSE. Subject to the provisions of regulation 12, all transactions evidenced by such contract note shall be settled through the Clearing House.

4 Position for Settlement:

(1) The settlement of transaction carried out by the member shall be made according to the settlement obligation statement prepared by the Exchange. The statement shall be prepared as per the Guidelines. The Clearing House shall arrange the statement for the concerned member and Depository on each trading day.

(2) The pay in day and pay out day for the settlement of trade executed in the Exchange shall be during such day and time as prescribed in the Guidelines.

6 Delivery of securities and making of payment by members–

(1) Each member shall deliver the physical securities to Clearing House and/or make available the required eligible securities in its Clearing Account of Depository on the pay in day according to the quantity, which the member is obligated to deliver.

(2) Every member shall make payment by an account payee cheque/pay order/demand draft payable at the bank of CSE to the Clearing House on the pay in day.

Provided that in case of spot order transaction arising out of record date /book closure date every member shall make payment by an account payee cheque if drawn on CSE’s designated bank account or by demand draft /pay order if drawn on other than CSE designated bank on the pay in day to the Clearing House.

7 Automatic buying in and selling out –

(1) CSE shall, subject to the provision of sub-regulation (2), automatically square-up the unsettled transaction by buying-in or selling-out as the case may be for short delivery of securities or non-payment on the day after the pay-in day in CSE at the risk and account of the defaulting member without any reference. CSE shall inform the defaulting member as to the difference money, if any, for payment immediately after buying-in or selling-out by CSE. Dishonour of cheque shall be treated as non-payment for that purpose.

(2) In case of spot order transaction if a member fails to deliver securities/make payment on the pay in day, the defaulting member shall make payment of the amount equal to the selling/buying price plus the contract charge and commission for the unsettled transaction by pay order  / demand draft to the clearing house within 10.00 a. m. of the next day of the pay in day  and the buying member shall receive the payment from the clearing house after 10:00 a.m. of the same day instead of the security in respect of the transaction carried out on trading day.

(3) If required quantity of securities can not be bought-in as per sub-regulation (1) because of suspension of the trade or delisting of a security or for any reason whatsoever the defaulting member shall make payment of the amount equal to the buying price plus the contract charge and commission for the unsettled security by pay order  / demand draft to the clearing house on the next day of the pay in day and the buying member shall receive the payment from the clearing house on the second day subsequent to the pay in day instead of the security in respect of the transaction carried out on trading day.

(4) The defaulting member shall not be allowed to carry out trading in CSE from the day subsequent to the pay in day until payment of the difference/compensation money and a fine as prescribed under regulation 9 are made to CSE. Excess difference money, if any, shall be forfeited by CSE:

Provided that if any member fails to make payment and/or deliver securities within the pay in day for more than once in any calendar month of English era, CSE shall inform SEC in writing details of such default matters immediately after closure of the settlement time determined by CSE for the pay in day. Such member shall not be allowed by CSE to carry on trading in CSE from the day subsequent to the pay in day in respect of the second failure until written clearance to this effect is issued from SEC to CSE.

8. Delivery of securities and issue of cheque by CSE–

(1) The Clearing House shall deliver physical securities and make payment by account payee cheque issued to a member in respect of the transaction carried out on each trading day on pay out day.

(2) In case of taking delivery of eligible securities the member will accept transfer of securities in its  Clearing Account  according to the amount which the member is entitled to receive with on the pay out day.

9. Fine for default:- The defaulting member shall be liable to pay a fine to CSE for each default as per the schedule given in the Guidelines.   

10. Replacement/Refund, etc. against bad or defective securities –

(1) If the securities delivered by a member turn out to be forged, fake, stolen, invalid, defective in any way whatsoever the complaint shall be lodged with CSE within one month from the end of the book closure date of concerned company or six months from the date of purchase whichever is earlier. CSE shall issue the notice of demand to the defaulting member within three days from the date of receipt of the complaint only if it is lodged within the stipulated time.

(2) The defaulting member shall be liable to replace such bad or defective securities or refund the amount at his selling price with interest at 2.5% per month for the period covering from the pay in day up to the day of the replacement/refund, etc, are completed, along with all benefits attributable to such securities at the pay in date, absolutely as per the buyer’s option, within seven market days of issuance of the written notice of demand by CSE.

(3) The defaulting member shall be barred from carrying on trade in CSE from the eighth market day of such notice if the member concerned fails to make replacement/refund, etc. within the said seven days until the replacement/ refund etc. are completed to the satisfaction of CSE.      

Provided that CSE shall from time to time prescribe/determine the modus operandi concerning identification of the defaulting member, notice, rectification, replacement/refund, etc. and/or otherwise handling of the bad or defective securities.

11. Continuous failure of a Member to pay any amount, difference money, interest and/or fine or replace any defective securities – If any member fails continuously to pay any amount, difference money, interest and/or fine in terms of regulations 7 and 9; and replace any defective securities along with attributable benefits, if any, in terms of regulation 10, CSE shall have the right to adjust the security deposit of the defaulting member, and in case of shortfall, to sell the membership of the defaulting member to meet the shortfall.

12. Direct settlement between the members for transaction of foreign buyer and/or seller –

(1) Members shall be allowed to carry out transaction of foreign buyer and/or seller involving a custodial bank registered with SEC, to be settled directly between the members through the custodial bank in respect of the transactions carried out on each trading day with intimation to the clearing house within the time stipulated by the Guidelines. The members concerned shall submit details of the settlements along with the documentary evidence thereof, as prescribed by CSE in this behalf, which shall include a confirmation certificate issued by the custodial bank concerned to CSE in respect of settlement of transaction, to the clearing house.

(2)The defaulting members shall not be allowed to carry out trade in CSE from the day of default until the concerned trade is settled to the satisfaction of CSE and a fine of Tk. 10,000 per day for each default is paid to CSE. CSE shall simultaneously furnish details of such default to the Commission.

13. Prohibitions of carry forward or short selling –

(1) No Member shall be allowed to short sell any securities or carry forward any transaction. The defaulting member shall be barred from carrying out trade in CSE immediately upon detecting the default by CSE through spot verification of the member’s books and records. In case of detection of short- sell, suspension of trading shall continue until a fine equivalent to the short-sell amount is paid to CSE.

(2) CSE shall simultaneously furnish details of such default to the Securities and Exchange Commission. If the defaulting member infringes this provision for more than once in a month of the English era, the suspension of his trade shall continue without prejudice to the provision of regulation 16, until a written clearance is issued by the Commission in this respect.

14. Settlement to client by delivery of securities and payment by  cheque by a member – The members shall make payment for securities sold and / or deliver physical securities purchased to their clients within one working day after the pay-out day. In case of eligible securities the Members shall transfer securities from their Clearing Accounts to the relevant Customer Account on the day the Securities are received. Any default shall attract a fine of Tk. 500 for each day for each default. Interest shall also be payable to a client for delayed payment at 1.5% per month.

15. Reporting to the Securities and Exchange Commission- CSE shall furnish a weekly report to SEC in the form determined by SEC on settlement of transactions within two days of the end of the week.

16. Violation to attract penal provisions- Violation of these regulations shall attract penal provisions of the Securities and Exchange Commission (Stock Dealer, Stock Broker and Authorised Representative) Rules, 2000,; the Securities and Exchange Commission Act,1993; and/or the Securities and Exchange Ordinance,1969.

Provided, however, that the transactions which were due to be settled, and the actions and obligations which were due to be disposed of, under the repealed Regulations shall be settled and disposed of, under the repealed Regulations.

By order of the Board

Abu Bakar Siddique
Acting Chief Executive Officer
Chittagong Stock Exchange Limited

GUIDELINES TO THE SETTLEMENT OF CHITTAGONG STOCK EXCHANGE
TRANSACTIONS REGULATIONS, 2005

[Please see regulation 2(s)]

1. Settlement Obligation Statement

The member shall settle the trade in which the member has dealt in according to “Settlement Obligation Statement” prepared by the Clearing House of CSE. The Clearing House shall prepare the statement to work out the settlement position of the member from processing of information in respect of the securities transaction carried out by Member on each trading day. In processing the information the Clearing House shall arrange the securities in the following categories and with the system applicable for settlement of each categorise of the securities:

1.1 A-category companies

(a) Companies, which are regular in holding the current annual general meetings and have declared dividend at the rate of ten percent or more in the last English calendar year and have paid the dividend within sixty days from the date of declaration and have submitted the requisite compliance report to SEC confirming the paying off the dividend within seven working days from the date of completion of disbursement shall be described as A-category companies. Mutual Funds and Debentures shall also be placed in A- category.

(b) In case of a company already placed in A- category, its share shall be placed in Z- category from the next day of submission, or expiry of the date of submission, of the requisite compliance report to SEC, if it is found that the company has failed either to pay off the declared dividend or to submit the said report thereon within the time limits prescribed in the erstwhile CCI’s Notification NO. SRO.385-Law/91 dated 15th December, 1991 read together with section 2G of the Securities and Exchange Ordinance, 1969 (XVII of 1969), for whatever reason.

1.2 B- category companies

(a) Companies, which are regular in holding the annual general meetings
but have declare dividend below ten percent in the last English calendar year and have paid the dividend within sixty days from the date of declaration and have submitted the requisite compliance report to SEC confirming the paying off the dividend within seven working days from the date of completion of disbursement shall be described as B- category companies,

(b) In case of a company already placed in B’-category, its share shall be placed in Z -category from the next day of submission, or expiry of the date of submission, of the requisite compliance report to SEC, if it is found that the company has failed either to pay off the declared dividend or to submit the said report thereon within the time limits prescribed in the erstwhile CCI’s Notification NO. SRO.385-Law/91 dated 15th December 1991 read together with section 2G of the Securities and Exchange Ordinance, 1969 (XVII of 1969), for whatever reason.

1.3 N-category companies

All newly listed companies except Greenfield companies shall be placed under N-category companies for which the settlement procedure followed for B- category companies shall be applicable.

1.4 G- category companies (i.e. greenfield companies)

(a) Newly listed shares of those companies, which do not fall under any of the Categories mentioned under 1.1, 1.2, 1.3 and 1.5, shall be placed under G - category companies for which the settlement procedure followed for B- category companies shall be applicable:

(b) In case of failure to declare dividend the shares of such companies shall continue to remain in this category until the date of the annual general meeting held after completing two full years from the date of commercial operation, as disclosed in the prospectus.

1.5    Z- category companies

(a) Companies, which failed to hold the current annual general meetings or have failed to declare any dividend or have declared dividend but failed to pay it off within 60 days from the date of declaration or failed to submit the requisite compliance report to SEC regarding disbursement of dividend within seven working days from completion of such disbursement date for whatsoever reason or companies which are not in operation for more than six months or whose accumulated loss after adjustment of revenue reserve, if any, is negative and exceeded its paid-up capital shall be described as Z- category companies:

(b) The words ‘or whose accumulated loss after adjustment of revenue reserve, if any, is negative and exceeded its paid-up capital’ mentioned in the above sub- regulation (a) shall not be applicable for the companies which have declared dividend out of the current profits in the last English calendar year and held annual general meeting(s) relating to all outstanding financial year (s) despite having such accumulated loss exceeding the paid up capital. 

(c) In case of a company already placed in Z-category and declares dividend, its share shall be placed in ‘A’ or ‘B’ category, as the case may be, from the next day of submission of the requisite compliance report to SEC confirming paying off the declared dividend within limits prescribed in the Notification NO. SRO.385-Law/91 dated 15th December, 1991 read together with section 2G of the Securities and Exchange Ordinance, 1969 (XVII of 1969) provided there is no defaulted annual general meeting of the company.

(d) The chief executive officer of the Exchange may bring any other company under this category, if deemed necessary, with the prior written consent from the Commission.

1.6 Settlement System

(a) The system for settlement of payment obligation of the trade of securities of  ‘A’, ‘B’, ‘N’ and ‘G’ category of companies shall be on adjusted due balance mechanism basis and settlement of securities obligation shall be on trade for trade basis.

(b) The system for settlement of the securities of Z- category of companies shall be on trade for trade basis in which the member has dealt in on a trading day.

2. Fixation of Settlement date (Pay in day and Pay out day)

The trades executed by members on each trading day shall be settled within the following periods of time:

2.1 Pay in day

The Pay in day for ‘A’, ‘B’, ‘N’ and ‘G’ category companies, shall be the first
day subsequent to the Trading day i.e. T+1 and on the third day subsequent to the trading day, i.e. T+3 for Z- category companies and on the trading day i.e. T+0 for spot order transactions of all category of companies.

2.2 Pay out day

The Pay out day for ‘A’, ‘B’, ‘N’ and ‘G’  category companies shall be the second day subsequent to the Pay in day, i.e. T+3, ,on the fourth day subsequent to the pay in day, i.e. T+7 for Z- category companies and on the first day subsequent to the trading day i.e. T+1 for spot order transactions  of all  category of companies.

2.3 Settlement date for transaction of foreign buyer and/or seller  involving a custodial bank.

(a) Direct settlement between the members for transaction of foreign buyer and/or seller involving a custodial bank shall be made within the fifth day subsequent to the trading day, i.e. T+5, in respect of the transactions carried out on each trading day with intimation to the clearing house.

(b) The members concerned shall submit details of the settlements to the clearing house within 10:00 a.m. of the sixth trading day subsequent to the concerned trading day (i.e. T+6).

2.4 Holiday

If any Pay in or pay out day falls on any holiday, the next day subsequent to the holiday shall be pay in or pay out day.

Explanations: - In this guideline, “holiday” means a day, which is so declared by CSE.

3. Fine for default

ubject to the fines specified otherwise, the defaulting members shall be liable to pay a fine to CSE for each default as per the following schedule-

Abu Bakar Siddique
Chief Executive Officer
Chittagong Stock Exchange Limited

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