(2) An application for grant of certificate of registration by a clearing member of the clearing corporation or clearing house of a derivatives exchange or derivatives segment of a stock exchange, shall be made in Form AA of Schedule I, through the concerned clearing corporation or clearing house of which he is a member.

Provided that a trading member who also seeks to act as a clearing member shall make separate applications for each activity in Form AA of Schedule I.

   (3) The derivatives exchange or segment or clearing house or corporation as the case may be shall forward the application to the Board as early as possible but not later than thirty days from the date of its receipt.

Furnishing of Information, Clarification,etc.

16B (1) The Board may require the applicant or the concerned stock exchange or segment or clearing house or corporation to furnish such other information or clarifications, regarding the trading and settlement in derivatives and matters connected thereto, to consider the application for grant of a certificate.

   (2) The applicant or its principal officer shall, if so required, appear before the Board for personal representation.

Consideration of Application

16C (1) The Board shall take into account for considering the grant of a certificate all matters relating to dealing and settlement in derivatives and in particular the following, namely, whether the applicant -

   (3) An applicant who desires to act as a clearing member, in addition to complying with the requirements of sub-regulation (1), shall have a minimum net worth of Rs.300 lacs and shall deposit at least a sum of Rs.50 lacs or higher amount with the clearing corporation or clearing house of the derivatives exchange or derivatives segment in the form specified from time to time.

Explanation : For the purpose of sub-regulation (2) and (3), the expression ` net worth� shall mean paid up capital and free reserves and other securities approved by the Board from time to time ( but does not include fixed assets, pledged securities, value of member�s card, non-allowable securities (unlisted securities), bad deliveries, doubtful debts and advances ( debts or advances overdue for more than three months or debts or advances given to the associate persons of the member ), prepaid expenses, losses, intangible assets and 30% value of marketable securities ).

Procedure for registration :

16 D. The Board on being satisfied that the applicant is eligible, shall grant a certificate in Form DA of Schedule I, to the applicant and send an intimation to that effect to the derivatives segment of the stock exchange or derivatives exchange or clearing corporation or clearing house, as the case may be.

Procedure where registration is not granted.

16E (1) Where an application for the grant of a certificate under regulation 16A does not fulfil the requirements specified in 16C of the regulations, the Board may reject the application of the applicant after giving a reasonable opportunity of being heard.

   (2) The refusal to grant the certificate of registration shall be communicated by the Board within 30 days of such  refusal to the concerned segment of the stock exchange, or clearing house or corporation and to the applicant stating therein the grounds on which the application has been rejected.

   (3) An applicant may, if aggrieved by the decision of the Board under sub-regulation (2) apply within a period of  thirty days from the date of receipt of such information to the Board for reconsideration of its decision.

   (4) The Board shall reconsider an application made under sub-regulation (3) and communicate its decision as soon as possible in writing to the applicant and to the concerned segment of the stock exchange or clearing house or corporation.

Effect of refusal of certificate of registration

16 F. An applicant, whose application for the grant of a certificate of registration has been refused by the Board, shall not, on and from the date of receipt of the communication under sub-regulation (2) or sub-regulation (4) of regulation 16E, deal in or settle the derivatives contracts as a member of the derivatives exchange or derivatives segment or clearing corporation or clearing house.

Payment of fees and consequences of failure to pay fees

16 G (1) Every applicant eligible for grant of a certificate as a trading or clearing member shall pay such fee and in such manner as specified in Schedule IV.

(2) Where a trading or clearing member fails to pay the fees as provided in sub-- regulation (1), the Board may suspend or cancel the registration certificate after giving an opportunity of being heard, whereupon the trading and clearing member shall cease to deal in or settle the derivatives contract as a member of the derivatives segment of the exchange or derivatives exchange or clearing corporation or clearing house�.

Trading member / Clearing member to abide by the Code of Conduct,etc.

16H (1) The code of conduct specified for the stock brokers as stipulated in Schedule II, shall be applicable mutatis mutandis to the trading member, clearing member and such members shall at all times abide by the same.

   (2) The trading member and clearing member shall abide by the code of conduct as specified in the rules, bye-laws and regulations of the derivatives exchange or derivatives segment of the exchange.

   (3) The trading members shall obtain details of the prospective clients in `Know Your Client� format as specified by the Board before executing an order on behalf of such client.

   (4) The trading member shall mandatorily furnish `Risk Disclosure Document� disclosing the risk inherent in trading in derivatives to the prospective clients in the form specified by the derivatives exchange or derivatives segment.

   (5) The trading or clearing member shall deposit margin or any other deposit and shall maintain position or exposure limit as specified by the Board or the concerned exchange or segment or clearing corporation or clearing house from time to time.

Chapter IV,V and VI applicable

16 I (1) The provision of Chapter IV,V and VI shall be applicable mutatis mutandis to a trading member and a clearing member and such members shall abide by the provisions of the said Chapters.

   (2) In the chapters referred to in sub-regulation (1), the word ` stock broker� shall refer to trading member or clearing member and the word �stock exchange� shall refer to `derivatives exchange or derivatives segment of an exchange or clearing corporation or clearing house.�

   (3) The Board may issue such directions under section 11B of the Act to the trading member or clearing member as may be deemed appropriate and such member shall abide by such directions.

   (4) In case of violation of any regulation, the trading or the clearing member shall be liable to penalty as specified in regulation 26.]⁶