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TMI BlogFramework of “Financial Disincentives for Surveillance Related Lapses” at Market Infrastructure Institutions.X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the safety and integrity of securities market in view of the significant increase in trading activity during the past few years, increased participation by retail individual investors, increased trading activity in the derivatives segment and deployment of new trading techniques and strategies by market participants. 2. MIIs, being the first-level regulators, are expected to be in the know of the ground realities of the securities market and their constituents and updations thereof. The MIIs, supervise their members in terms of the respective bye-laws framed under the Securities Contracts (Regulation) Act, 1956 ("SCRA") / Depositories Act, 1996. They need to be well equipped to detect market abuse, including new modus-operandi that cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fies surveillance as part of the core functions of the Depository. 6. The general objective of surveillance by MIIs is thus to monitor the market to detect and deter manipulation or abusive trading that affects the integrity of the market, and to provide information that supports the Regulator's enforcement actions. In this backdrop, market surveillance by MIIs may be said to include, but not limited to the following broad activities as may be applicable from time to time: 6.1. Monitoring the day-to-day activities in the markets including trading / margining / settlement / demat transactions / holdings; 6.2. Monitoring the conduct of market intermediaries through generation and processing of alerts, seeking trading rationale, carrying ou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or delayed implementation of any decision or communication of SEBI relating to surveillance as per agreed scope and timelines; 8.1.1.2. Any lapse observed in discharge of surveillance activities as per agreed scope and timelines; and 8.1.1.3. Any inadequate reporting or non-reporting of surveillance related activity as per agreed timelines. 8.2. Amount of Financial Disincentives 8.2.1. The amount of financial disincentives as per the framework of financial disincentives for Surveillance Related Lapses ("FDSRL") at MIIs, as detailed below, shall be determined on the basis of total annual revenue of the MII, as an indicator of the size and impact of the MII on the market ecosystem, during the previous Financial Year as per the latest aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke appropriate disclosures required in terms of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, regarding any financial disincentive(s) imposed by SEBI under this circular. 8.5. Applicability: 8.5.1. The framework of FDSRL at MIIs shall not be applicable to matters / instances wherein it: 8.5.1.1. has market wide impact, or 8.5.1.2. caused losses to a large number of investors, or 8.5.1.3. affected the integrity of the market, and any such matter shall be subject to appropriate proceedings under the SCRA/ SEBI Act, 1992/ Depositories Act, 1996. 8.5.2. The framework of FDSRL at MIIs shall not be applicable for matters / instances that are procedural in nature, including th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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