Arbitration
Mechanism through Stock Exchanges - Introduction of Automatic Process and
Common Pool of Arbitrators
CIRCULAR, CIR/MRD/ICC/ 8 /2013, dated March 18,
2013
All Stock
Exchanges having nation-wide trading terminals
SEBI has
received inputs from investors regarding functioning of the arbitration mechanism
at the Stock Exchanges. In light of which, you are advised to carry out the following
changes in the arbitration mechanism.
1. List of
Arbitrators on the panel of all stock exchanges having nation-wide trading terminals
shall be pooled and will be called a 'Common Pool'. This list shall be made publicly
available including by way of display on websites of the stock exchanges.
2. 'Common pool'
of Arbitrators will consist of Arbitrators listed on the panels of all stock exchanges
having nation-wide trading terminals. The pooling of arbitrators will be done
centre-wise. To illustrate, the list of arbitrators on the panel of all stock exchanges
for the region covered by the Delhi centre will be pooled. This would enable an
applicant from the region to choose any arbitrator from the 'Common Pool' for
Delhi.
If the client
and member (stock broker, trading member or clearing member) fail to choose the
Arbitrator(s) from the Common Pool, the Arbitrator(s) will be chosen by an
'Automatic Process' wherein neither the parties to arbitration (i.e. client or member)
nor the concerned Stock Exchanges will be directly involved.
3. The
'Automatic Process' will entail a randomized, computer generated selection of Arbitrator,
from the list of Arbitrators in the 'Common Pool'. The selection process shall
be in chronological order of the receipt of arbitration reference i.e. only
after selecting an arbitrator for the former arbitration reference received,
selection for the latter shall be taken up.
4. The
'Automatic Process' will send a system generated, real time alert (sms, email etc.)
to all entities involved in the particular case. Further, the communication for
the appointment of the Arbitrator will be sent immediately and in any case not
later than the next working day from the day of picking of the Arbitrator. This
communication will be sent by the stock exchange on which the dispute had taken
place, to all concerned entities including clients, arbitrators, members, stock
exchanges etc.
5. The selection
of Arbitrators by Stock Exchanges as done currently, shall henceforth be
replaced by the 'Automatic Process'.
6. In case of
any probable conflict of interest in an arbitration reference being assigned to
any Arbitrator the Arbitrator will have to upfront decline the arbitration
reference. After the said arbitrator declines, the 'automatic process' will
pick the name of another Arbitrator. This will continue till the time there is
no conflict of interest, by the selected arbitrator. In this regard, the
timelines mentioned at clause 5.3 in CIR/MRD/DSA/24/2010 dated August 11, 2010
of 30 days might get extended. However, SEs shall put on record the reasons of
such extension.
7. In case of
conflict of interest by the arbitrator, the information for the same may reach the
stock exchange on which the dispute has taken place within 15 days of receipt
of communication from the SE above. The said information may be sent by any
method which ensures proof of delivery.
8. Fees of
arbitrator shall be dealt in line with existing provisions, by the stock
exchange on which the dispute had taken place.
9. The
recognised stock exchanges with nation-wide trading terminals are advised to make
necessary amendments to relevant bye-laws for the implementation of the above
decision immediately.
10. SEBI
inspection of stock exchanges shall cover implementation of this circular.
11. The circular
is being issued in exercise of powers conferred upon SEBI under Section 11(1)
of the Securities and Exchange Board of India Act, 1992.
12. This
circular is being issued in partial modification of SEBI Circular No. CIR/MRD/DSA/24/2010
dated August 11, 2010 and will come into effect from 1st April 2013.
13. The circular
is available on SEBI website at www.sebi.gov.in under the categories “Legal
Framework” and “Circulars”.
