Skip to main content

Sebi asks exchanges to frame new outsourcing policy

Sebi asks exchanges to frame new outsourcing policy
The Securities and Exchange Board of India (Sebi) has asked stock exchanges and clearing corporations to prepare a framework for appointing of third-party vendors. The market regulator has directed the so-called market infrastructure institutions to not outsource core and critical operations such as trading information, infrastructure and surveillance.
Industry players say the move will help in better risk management and safeguard the markets and investors from unforeseen risks.
There have been instances in the past where the promoter of an exchange has also acted as a service provider, potentially creating a conflict of interest situation.
Although the regulator has allowed the exchanges and clearing corporations to outsource activities to associate or group companies, it has asked for a clear demarcation of such dealings and an arm's-length relationship.
Sebi has also allowed outsourcing of certain core activities to specialist vendors who are experts in their field. However, in all such cases, the responsibility and control shall wholly vest with the exchanges and clearing corporations.
Further, if the trading or clearing software is purchased from a vendor, then there must be an arrangement to keep the source code in escrow. The move will help the exchanges get access to the software code and go on with the business in an event of an issue the vendor.
On the contractual terms with the concerned vendors, Sebi said that the agreement should mention all the potential conflicts and obligations of the contracting parties.
"Each agreement should allow for renegotiation and renewal to enable the exchange to retain an appropriate level of control over the outsourcing and the right to intervene with appropriate measures to meet its legal and regulatory obligations," it noted.
Besides, the exchanges and the clearing corporations will have to ensure third-party entities have proven high-delivery standards and expertise in the respective field. Also, Sebi has directed exchanges to follow proper due-diligence process, which includes checking parameters like track record, delivery standard, unique selling proposition and service standards.
Sebi has also prescribed strict termination procedure. According to the regulator, the outsourcing agreement should provide regulatory authority to access the records of the service provider. Further, Sebi wants new guidelines to also give a clear mention of audit of the outsourced activities.
"The market intermediaries need to ensure proper audit of the implementation of risk assessment and mitigation measures listed in the outsourcing policy document, the outsourcing agreement and the service-level agreements pertaining to IT systems, among other measures," Sebi said.
The Business Standard, New Delhi, 14th September 2017

Comments

Popular posts from this blog

Shrinking footprints of foreign banks in India

Shrinking footprints of foreign banks in India Foreign banks are increasingly shrinking their presence in India and are also becoming more conservative than private and public sector counterparts. While many of them have sold some of their businesses in India as part of their global strategy, some are trying to keep their core expertise intact. Others are branching out to newer areas to continue business momentum.For example, HSBC and Barclays Bank in India have got out of the retail business, whereas corporate-focused Standard Chartered Bank is now trying to increase its focus on retail “Building a retail franchise is a huge exercise and takes a long time. You cannot afford to lose it,” said Shashank Joshi, Bank of Tokyo-Mitsubishi UFJ’s India head.According to the Reserve Bank of India (RBI) data, foreign banks’ combined loan book shrunk nearly 10 per cent from Rs 3.78 trillion in fiscal 2015-16 to Rs 3.42 trillion last financial year. The banking industry, which includes foreign banks…

RBI rushes in to prop up falling rupee

RBI rushes in to prop up falling rupee India’s central bank reportedly intervened in the currency markets on Monday to prevent a further slide in the local unit, which breached the 67 mark to a dollar for the first time in 15 months amid a widening trade gap and runaway import bills fuelled by high crude-oil prices. Some state-owned banks were seen selling dollars aggressively, interventions that market dealers attributed to the central bank’s strategy to stem the decline of the Indian rupee against the US currency. The rupee is the worst performing among a dozen Asian monetary units in the past three months. It lost 4.25 per cent to the dollar during the period, show data from Bloomberg. On Monday, the Reserve Bank of India (RBI) is said to have sold about Rs 800 million collectively on the spot and exchange traded futures markets, dealers said. An email sent to RBI remained unanswered until the publication of this report. The currency market has seen such a strong central bank interven…

GST Refund of Rs 20,000 Cr Pending: Exporters’ Body

GST Refund of Rs  20,000 Cr Pending: Exporters’ Body Refund of over Rs 20,000 crore on account of Goods and Services Tax (GST) is pending with the government with more than half the amount stuck as input tax credit, Federation of Indian Export Organisations said on Tuesday. While claims over Rs7,000 crore were cleared in March, the amount was Rs 1,000 crore in April.However, after exporters’ request, the GST council and tax department are organizing a second phase of Special Refund Fortnight starting May 31, which will enable exporters to draw their refunds at a speedy pace. Many exporters have been unable to file the refund of input tax credit due to technical glitches, exports and claim happened in different months. The major challenge lies on ITC refund especially because the process is partly electronic and partly manual which is cumbersome and add to the transaction cost, the exporters’ body said. On IGST, refunds are getting delayed due to airline and shipping companies not submitt…