INTRODUCTION
Bombay Stock Exchange Limited is the oldest stock exchange in Asia with a rich heritage. Popularly known as "BSE", it was established as "The Native Share & Stock Brokers Association" in 1875. It is the first stock exchange in the country to obtain permanent recognition in 1956 from the Government of India under the Securities Contracts (Regulation) Act, 1956.The Exchange's pivotal and pre-eminent role in the development of the Indian capital market is widely recognized and its index, SENSEX, is tracked worldwide.
Earlier an Association of Persons (AOP), the Exchange is now a demutualised and corporatised entity incorporated under the provisions of the Companies Act, 1956, pursuant to the BSE(Corporatisation and Demutualisation) Scheme, 2005 notified by the Securities and Exchange Board of India (SEBI).
With demutualisation, the trading rights and ownership rights have been de-linked effectively addressing concerns regarding perceived and real conflicts of interest. The Exchange is professionally managed under the overall direction of the Board of Directors.The Board comprises eminent professionals, representatives of Trading Members and the Managing Director of the Exchange. The Board is inclusive and is designed to benefit from theparticipation of market intermediaries.
In terms of organisation structure, the Board formulates larger policy issues and exercises over-all control. The committees constituted by the Board are broad-based.The day-to-dayoperations of the Exchange are managed by the Managing Director and a management team of professionals.
The Exchange has a nation-wide reach with a presence in 417 cities and towns of India. The systems and processes of the Exchange are designed to safeguard market integrity and enhance transparency in operations. During the year 2004-2005, the trading volumes on the Exchange showed robust growth. The Exchange provides an efficient and transparent market for trading in equity, debt instruments and derivatives. The BSE's On Line Trading System (BOLT) is a proprietory system of the Exchange and is BS 7799-2-2002 certified. The surveillance and clearing & settlement functions of the Exchange are ISO 9001:2000 certified.
Technology
BSE Ltd places great deal of emphasis on Information Technology to strengthen its functioning and performance. 'Operations & Trading Department' continuously upgrades the hardware, software and networking systems, thus enabling the Exchange to enhance the quality and standard of service provided to its members and other market intermediaries.
To facilitate smooth transaction, BSE had replaced its open outcry system with BSE On-line Trading (BOLT) facility in 1995. This totally automated screen based trading in securities was put into practice nation-wide within a record time of just 50 days.
BSE Ltd places great deal of emphasis on Information Technology to strengthen its functioning and performance. 'Operations & Trading Department' continuously upgrades the hardware, software and networking systems, thus enabling the Exchange to enhance the quality and standard of service provided to its members and other market intermediaries.
To facilitate smooth transaction, BSE had replaced its open outcry system with BSE On-line Trading (BOLT) facility in 1995. This totally automated screen based trading in securities was put into practice nation-wide within a record time of just 50 days.
The BOLT platform capacity has been enhanced to 40 lakh orders per day by upgrading the hardware. BOLT has been certified by DNV for conforming to BS7799 security standards. With this, BSE is the second stock exchange in the world to have this certification.
Exchange has also introduced the world's first centralized exchange based Internet trading system, BSEWEBx.com. The initiative enables investors anywhere in the world to trade on the BSE platform. BSE's website http://www.bseindia.com/ provides comprehensive information on the stock market. It is one of the most popular financial websites in India and is regularly visited by financial organizations and other stakeholders for updates.
BSE's team of experts and professionals, along with its strategic partners have put into place several critical systems such as Derivatives Trading & Settlement System (DTSS), Electronic Contract Notes (ECN), Unique Client Code registration (UCC), Real time data dissemination - system - Datafeed, Integrated Back office System - CDB / IDB, Book Building System (BBS) & Reverse Book Building System (RBBS) etc.
BSE also operates one of the largest private networks in India, comprising campus LAN; WAN set up within Mumbai and across some major metros in India and VSAT set up across the country. BSE's Campus LAN covers around 350 member offices across three BSE buildings P.J. Towers, Rotunda and Cama building. BSE WAN setup connects approximately 2000 member offices within Mumbai and some major metros to BSE systems. Leased MLLN circuits from MTNL / BSNL are provided with ISDN / TTML leased circuit backup. Around 300 circuits are of 2Mbps capacity and rest all are of 64Kbps capacity.
In year 2000 BSE set up its own VSAT Master Earth Station (HUB), which uses full transponder on INSAT 3B satellite to cater to roughly 2000 locations in over 400 cities across the country. Regional Hubs for local fan out of leased lines within Metros backed by high availability trunk backbone to BSE. The regional technology hubs are commissioned in Ahmedabad, Bangalore, Chandigarh, Chennai, Delhi, Hyderabad, Indore, Jaipur, Kolkatta, Ludhiana, Pune and Rajkot provide cost-effective reliable services to members.
The trading and settlement activities of the member-brokers are closely monitored through On-line Real Time System known as BSE Online Surveillance System (BOSS). The system enables the Exchange to detect market abuses at a nascent stage, improve the risk management system and strengthen the self-regulatory mechanisms. Currently, BSE is in the process of evolving an integrated system for online surveillance of Cash and Derivatives Segment through BSE Online Surveillance System - Integrated (BOSS - i).
BSE uses higher end fault tolerant systems for its trading and related functionalities. It uses Integrity Non-stop S88000 systems for its online trading systems (BOLT). The systems have been designed to deliver the best performance without compromising on key factors of availability, scalability, ROI and TCO.
There are powerful RISC based Unix severs rp8400 from hp for our Derivatives, Settlement, Backoffice, Datafeed, BBS, RBBS and other systems related to trading / non-trading and related functionalities. The systems are facilitated by the use of the robust and high available storage subsystems from hp. We use one of the most powerful RISC based Alpha GS140 and ES40 servers for our Internet based trading system (ITS) enabling the end user to carry out the trading activities from any location facilitated by the internet.
We also use Intel 8 way and 4 way servers for bseindia.com web site, one of the best portal on information related to capital markets. BSE strictly adheres to IS policies and IS Security policies and procedures for its day to day operational activities on 24 x 7 basis which has enabled us to achieve the BS7799 certification. In addition, BSE has also been successful in maintaining systems and processes uptime of 99.99%
SAFETY OF THE MARKET
One of the objectives of the Exchange is to promote and inculcate honourable and just practices of trade in securities transactions and to discourage malpractices. The surveillance function at the Exchange has assumed greater importance in the last few years. The Securities and Exchange Board of India (SEBI) had directed the Stock Exchanges in August 1995 to set up a separate Surveillance Department with staff exclusively assigned to surveillance functions. The Exchange has accordingly set up a separate Surveillance Department to keep a close watch on price movement of scrips, detect market manipulations like price rigging, etc., monitor abnormal prices and volumes which are not consistent with normal trading pattern and monitor the member-brokers' position to ensure that defaults do not occur.
One of the objectives of the Exchange is to promote and inculcate honourable and just practices of trade in securities transactions and to discourage malpractices. The surveillance function at the Exchange has assumed greater importance in the last few years. The Securities and Exchange Board of India (SEBI) had directed the Stock Exchanges in August 1995 to set up a separate Surveillance Department with staff exclusively assigned to surveillance functions. The Exchange has accordingly set up a separate Surveillance Department to keep a close watch on price movement of scrips, detect market manipulations like price rigging, etc., monitor abnormal prices and volumes which are not consistent with normal trading pattern and monitor the member-brokers' position to ensure that defaults do not occur.
This Department, which is headed by a General Manager, reports directly to the Executive Director. The Surveillance Department monitors exposure of the members on a daily basis. It also scrutinises the prices and volumes of the scrips on a daily basis. As per the guidelines issued by SEBI, the Exchanges are required to apply a daily Circuit Filter of 20% on all the scrips except on the scrips on which derivative products are available or are included in the indices on which derivative products are available. On these scrips Exchange has imposed dummy circuit filters to avoid punching error by members, if any. The imposition of circuit filters on scrips ensures that the price of the scrip cannot move upward or downward beyond the limit set for a day.
The large variation in the prices as well as the volumes of the scrips are scrutinised and appropriate actions are taken. The scrips which reach new high or new low and companies which have high turnover, are watched. Also the prices and volumes in the newly listed scrips are monitored. In case certain abnormalities are noticed, then circuit filters are reduced to make it difficult for the price manipulators to increase or push down the prices of a scrip within a short period of time.
The Exchange imposes special margin in the scrips where it is suspected that there is an attempt to ramp up the prices by creating artificial volumes. The Exchange also transfers the scrips for trading and settlement on a trade-to-trade basis which would result into giving/taking delivery of shares on a gross level and no intra-day/settlement netting off/squaring off facility would be permitted. In cases where the abnormal movements continue despite the aforesaid measures, trading in the scrip is suspended.
Detailed investigations are conducted in cases where price manipulation is suspected and disciplinary action is taken against the members concerned. The Exchange has developed an On-line Real Time (OLRT) Surveillance System, which has been commissioned from July 15, 1999. Under this system, alerts are generated by the system on-line, in real time, based on certain preset parameters like the price and volume variation in scrips, members taking unduly large positions not commensurate with their financial position or having concentrated position(s) in one or a few scrips, etc.
This system includes databases such as company profile, members' profile and historical database of turnover and price movement in scrips, members' turnover, their pay-in obligations, etc. The system generates alerts on the basis of pre-set parameters during the trading hours and corrective action based on further investigations is taken in such cases.
Surveillance at BSE
BSE is one of the few Exchanges in the world which has obtained ISO certification for its Surveillance function. The main objective of the Surveillance function is to promote market integrity in two ways, first, by monitoring price & volume movements (volatility) as well as by detecting potential market abuses at a nascent stage, with a view to minimizing the ability of the market participants, to influence the price of the scrip in the absence of any meaningful information, and second, by managing default risk by taking necessary timely actions.
Surveillance activities at the Exchange are divided broadly into three major segments, namely, Price Monitoring, Position Monitoring and Investigations. Price monitoring is manly related to the price movement/ abnormal fluctuation in prices or volumes etc. whereas the position monitoring relates mainly to abnormal positions of members, etc. in order to manage the default risk. The Investigation cell conducts snap investigations/examinations/detailed investigations in scrips where manipulation /aberration is suspected.
Market abuse is a broad term, which includes fictitious/ artificial transactions, circular trading, false or misleading impressions, insider trading, etc. The function of this cell is to detect potential market abuses at a nascent stage to reduce the ability of the market participants to unduly influence the price of the scrips traded at the Exchange by taking surveillance actions like reduction of circuit filters, imposition of special margin, transferring scrips on a trade-to-trade settlement basis, suspension of scrips/ members, etc.
These pro-active measures are taken based on the analysis/ processing of alerts generated based on various parameters and other inputs like news, company results, etc. The broad parameters considered for generation and analysis of alerts are price movement, top ‘n’ turnover, scrips traded infrequently, scrips hitting new high/ low, scrips picked up for rumour verification, etc. The scrips are also picked up based on the preliminary analysis/ enquiries and are forwarded to Investigation cell for further examination/ investigation.
The detail explanation of the Surveillance actions taken by the Exchange from time to time are as follows :
Special Margins
The system has a facility to generate the alerts on-line, in real time, based on certain preset parameters like price and volume variations in scrips, members taking unduly large positions not commensurate with their financial position or having large concentrated position(s) in one or few scrips, etc. An alert is a measure of abnormal behaviour. An Alert occurs in the Surveillance system when a metric behaves significantly differently from its benchmark. The alerts generated by the system are analyzed and corrective action based on preliminary investigations is taken in such cases. The system also provides facility to access trades and orders of members.
The system has a facility to generate the alerts on-line, in real time, based on certain preset parameters like price and volume variations in scrips, members taking unduly large positions not commensurate with their financial position or having large concentrated position(s) in one or few scrips, etc. An alert is a measure of abnormal behaviour. An Alert occurs in the Surveillance system when a metric behaves significantly differently from its benchmark. The alerts generated by the system are analyzed and corrective action based on preliminary investigations is taken in such cases. The system also provides facility to access trades and orders of members.
Reduction of Circuit Filters
The circuit filters are reduced in case of illiquid scrips or as a price containment measures. The circuit filters are reduced to 10 % or 5 % or 2 % as the case may be, based on the criteria decided by the department. No circuit filters are applicable on scrips on which derivative products are available and scrips which are liquid & included in indices on which derivative products are available. However, the Exchange imposes dummy circuit filter on these scrips to avoid punching errors, if any.
The circuit filters are reduced in case of illiquid scrips or as a price containment measures. The circuit filters are reduced to 10 % or 5 % or 2 % as the case may be, based on the criteria decided by the department. No circuit filters are applicable on scrips on which derivative products are available and scrips which are liquid & included in indices on which derivative products are available. However, the Exchange imposes dummy circuit filter on these scrips to avoid punching errors, if any.
Circuit Filter of 20 % is applicable on other scrips which are not included in the above-mentioned category.
Trade to Trade
If a scrip is shifted on a Trade-to trade settlement basis, selling/ buying of shares in that scrip would result into giving/ taking delivery of shares at the gross level and no intra day netting off/ square off facility would be permitted. The scrips which form part of 'Z group' are compulsorily settled on a trade to trade settlement basis. In addition to that Surveillance department transfers various scrips from time to time on a trade to trade settlement basis (T & TS group) based on the criteria decided jointly by the Exchanges and SEBI.
If a scrip is shifted on a Trade-to trade settlement basis, selling/ buying of shares in that scrip would result into giving/ taking delivery of shares at the gross level and no intra day netting off/ square off facility would be permitted. The scrips which form part of 'Z group' are compulsorily settled on a trade to trade settlement basis. In addition to that Surveillance department transfers various scrips from time to time on a trade to trade settlement basis (T & TS group) based on the criteria decided jointly by the Exchanges and SEBI.
Suspension of a scrip
The scrips are suspended by the Surveillance department in exceptional cases pending investigation or if the same scrip is suspended by any other Stock Exchange as a Surveillance action.
Rumour Verification
Surveillance Department liaises with Compliance Officers of companies to obtain comments of the company on various price sensitive corporate news items appearing in the selected New Papers. Comments received from the companies are disseminated to the market by way of BOLT Ticker and/ or Notices on website. If clarification received from the company denies the news / information, a letter is sent to the company asking them to take up the matter with concerned media organization in view of divergence between company clarification and the news item.
Investigations
The investigation cell of the Department of Surveillance and Supervision conducts following types of analysis of suspected market irregularities in a systematic and logical manner with a view to detect market abuse and accordingly take appropriate and timely actions.
Snap Investigations:
Potential cases of market irregularities are taken up for further analysis. A preliminary analysis of the trading pattern and corporate developments in the scrip to ascertain whether the price or volume variation observed requires further detailed analysis.
Examinations
Examinations are more detailed form of preliminary analysis of the trading pattern and various developments in the company wherein a report is prepared. These examinations are conducted usually on receiving a reference from SEBI or any other department of the Exchange or based on an investor complaint.
Investigations
These are full - fledged and detailed investigations wherein a complete analysis is conducted in a systematic and logical manner based on the information available with the Exchange and information sought/received from members, companies, depositories and various other sources. These investigations are conducted to establish and prove the manipulation suspected in the course of preliminary analysis.
The department imposes penalty or deactivate BOLT terminals or suspend the member/s who are involved in market manipulation, based on the input/ evidence available from investigation report or as and when directed by SEBI. The cases of habitual offenders are taken to Disciplinary Action Committee, which takes the disciplinary actions against these members.
Position Monitoring
The Surveillance Department closely monitors outstanding exposure of members on a daily basis. For this purpose, it has developed various market monitoring reports. The reports are scrutinized to ascertain whether there is excessive purchase or sale position build up compared to the normal business of the member, whether there are concentrated purchases or sales, whether the purchases have been made by inactive or financially weak members and even the quality of scrips is considered to assess the quality of exposure. Based on analysis of the above factors and the margins already paid and the capital deposited by the member, early pay-in calls are made, if required. Some members are even advised to reduce their outstanding exposure in the market.
The Surveillance Department closely monitors outstanding exposure of members on a daily basis. For this purpose, it has developed various market monitoring reports. The reports are scrutinized to ascertain whether there is excessive purchase or sale position build up compared to the normal business of the member, whether there are concentrated purchases or sales, whether the purchases have been made by inactive or financially weak members and even the quality of scrips is considered to assess the quality of exposure. Based on analysis of the above factors and the margins already paid and the capital deposited by the member, early pay-in calls are made, if required. Some members are even advised to reduce their outstanding exposure in the market.
Trading restrictions are placed on financially weak members as and when deemed fit after taking into consideration their past track record.The department thus executes the Risk Management functions to avert possible payment default of members by taking timely corrective measures.
SOLUTIONS AT ONE STOP
Bombay Stock Exchange Limited (BSE) which was founded in 1875 with six brokers has now grown into a giant institution with over 874 registered Broker-Members spread over 380 cities across the country. Today, BSE's Wide Area Network (WAN) connecting over 8000 BSE Online Trading (BOLT) System Trader Work Stations (TWS) is one of the largest of its kind in the country.
With a view to provide efficient and integrated services to the investing public through the members and their associates in the operations pertaining to the Exchange, Bombay Stock Exchange Limited (BSE) has set up a unique Member Services and Development to attend to the problems of the Broker-Members.
Integrated ServicesAll issues addressed at One Stop
Member Services and Development Department is the single point interface for interacting with the Exchange Administration to address to Members' issues. The Department takes care of various problems and constraints faced by the Members in various products such as Cash, Derivatives, Internet Trading, and Processes such as Trading, Technology, Clearing and Settlement, Surveillance and Inspection, Membership, Training, Corporate Information, et al.
Relationship ManagersPersonalised Service to Members
Member Services and Development has put in place the concept of 'Relationship Managers' whereby an Officer is responsible for providing comprehensive services to a group/ set of Members alloted to him/her. The Relationship Managers maintain a comprehensive database on the members and their associates.
Member Services and Development has put in place the concept of 'Relationship Managers' whereby an Officer is responsible for providing comprehensive services to a group/ set of Members alloted to him/her. The Relationship Managers maintain a comprehensive database on the members and their associates.
A distinct feature of the functioning of the Relationship Manager is attending to the diverse problems of the Members at one stop by co-ordinating with various departments thus saving valuable time and energy for the Members. This synergetic effort will benefit both the Exchange and its members in consolidating the business and exploiting the opportunities.
Technical HELP DESK
Systems HELP DESK undertakes any system related issues concerning trading on BOLT, DTSS, BSE webx Systems, etc. that are available through different Data Networks, viz. Managed Leased Data Network (MLDN) and Wide Area Network (WAN) through VSAT connectivity spread across the length and breadth of the country.
Systems HELP DESK undertakes any system related issues concerning trading on BOLT, DTSS, BSE webx Systems, etc. that are available through different Data Networks, viz. Managed Leased Data Network (MLDN) and Wide Area Network (WAN) through VSAT connectivity spread across the length and breadth of the country.
We Endeavour
To have closer interaction with the Members to understand their problems and suggest solutionsThe members are free to share with their respective Relationship Managers, the problems that they are facing while trading on BSE. The problems may relate to trading systems of BSE such as BOLT for Cash Segment, DTSS for Derivatives Segment, BSE webx - Internet Trading System, Clearing & Settlement on BSE, Inspection & Surveillance, Corporate Information, et al.
To assist Members through Training, Publications, Presentations to their Clients/ Sub-brokers/ InvestorsWith the advent of new products and systems in the Indian capital markets, there is a definite need to create awareness about them among the various market participants including the members and their associates (sub-brokers, remisiers, etc.)
The Relationship Managers would provide necessary assistance to their set of members in conducting specialised training programmes on various products / segments of BSE for their staff and associates. The members are constantly informed of the status of their issues registered with the Department. The Relationship Managers also appraise their members about the changes in operational procedures or any new developments in the Exchange.
To expeditiously handle all issues/queries pertaining to Regional Stock Exchanges (RSEs).Regional Stock Exchanges (RSEs) in the country have acquired membership of BSE through the subsidiary route. Realising the business potential that these RSEs bring with them, a set of Relationship Managers have been deputed for handling the accounts of subsidiary companies of RSEs and provide them all assistance.
To be a Single Window to attend to all queries of Broker-Members and provide quick response. by coordinating with other internal Departments.The Relationship Managers carry out constant follow-up on the queries escalated to other internal departments of the Exchange for expeditious resolution of the issues.
Suggestions are also invited from members on the existing operational proceduresPeriodic discussions are held with the members and suggestions are solicited on the various issues regarding operational procedures. If felt viable and acceptable, the Department strives to implement the member's suggestions/ recommendations that would benefit other market intermediaries.
Careers
At Bombay Stock Exchange Ltd, we continuously upgrade ourselves and strive to provide world-class service, thus adding value to the Capital Market. BSE is committed to operating a fair and orderly market that is both technology driven as well as fast paced, with an edge of efficiency.
The Exchange believes that employees are the driving force for its ambitious growth plans. We at the Exchange, endeavor to attract motivated, adaptable employees with a customer service focus, strong team spirit and sharp business acumen to fulfill our dreams.
The Exchange is committed to creating and maintaining a culture that fosters an inclusive, diverse workforce; an environment in which every employee has the opportunity to demonstrate his or her potential by performing to meet the challenges ahead. In short meritocracy is the order that we respect.
We offer every employee a very congenial and vibrant working environment, conducive to bringing out the best in every employee.
