TaxTMI 
TaxTMI 
International Financial Services Centres Authority (Market Infrastructure Institutions) Regulations, 2021
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....e on the thirtieth day of its publication in the Official Gazette. 2. Definitions (1) In these regulations, unless the context otherwise requires, the terms defined herein shall bear the meanings as assigned below, and their cognate expressions shall be construed accordingly, - (a) "associate" in relation to a person shall include another person: i. who, directly or indirectly, by himself, or in combination with other persons, exercises control over the first person; ii. who holds control of at least twenty percent of the total voting power of the first person; iii. who is a holding company or a subsidiary company of the first person; iv. who is a relative of the first person; v. who is a member of a Hindu Undivided Family wherein the first person is also a member; or vi. such other cases where the Authority is of the view that a person shall be considered as an associate based on the facts and factors including the extent of control, independence, conflict of interest; (b) "Authority" means the International Financial Services Centres Authority established under sub-section (1) of section 4 of the IFSCA ....
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.... a clearing corporation by setting off or adjustment of the inter-se obligations or claims arising out of buying and selling of securities, including the claims and obligations arising out of the determination by the clearing corporation or stock exchange, on the insolvency, winding-up, liquidation or resolution of any clearing member or trading member or client or such other circumstances as the clearing corporation may specify in its bye-laws, of the transactions admitted for settlement at a future date, so that only a net claim be demanded, or a net obligation be owed; (l) "novation" means the act of one or more recognised clearing corporations interposing between the parties of every trade, so as to be a legal counterparty; (m) "public interest director" means an independent director representing the interests of investors in securities market in an IFSC and who is not having any association, directly or indirectly, which in the opinion of the Authority, is in conflict with his role; (n) "recognised clearing corporation" means a clearing corporation in an IFSC recognised by the Authority; (o) "recognised depository" means a depository in an I....
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.... in an IFSC shall be accompanied by a copy of the draft bye-laws of the depository. 8. Requirements for grant of recognition (1) An applicant seeking recognition as a stock exchange or clearing corporation, as the case may be, shall comply with the following conditions, namely, - (a) the applicant is a company limited by shares; (b) the applicant is demutualised; (c) the applicant, its directors and its shareholders who hold or intend to hold shares, are fit and proper persons as specified in these regulations; (d) the applicant satisfies the requirements relating to the ownership and governance structure specified in these regulations; (e) the applicant satisfies the net worth requirements specified in these regulations; (f) the applicant satisfies the requisite capability including its financial capacity, functional expertise and infrastructure. (2) An applicant seeking recognition as a stock exchange shall, in addition to the conditions specified in sub-regulation (1), comply with the following conditions, namely, - (a) the applicant has the necessary infrastructure for the orderly execution of trades; ....
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....anagement of trades cleared and settled and is supported by a suitable business continuity plan including a disaster recovery site; (h) the applicant has in its employment, sufficient number of persons having adequate professional and other relevant experience to the satisfaction of the Authority; (i) the applicant has the necessary arrangements in place for resolving disputes and redressal of grievances arising out of clearing and settlement of trades; (j) the applicant has an agreement with a depository and with a recognised stock exchange in respect of clearing and settlement of the trades; and (k) any other conditions as may be specified by the Authority. (4) An applicant seeking recognition as a depository shall have the necessary resources for efficient and orderly functioning of a depository and in particular, comply with the following conditions: (a) the depository satisfies the net-worth requirements specified in these regulations; (b) the bye-laws and legal documents are consistent with the objective of the depository and protecting the interest of investors; (c) the automatic data processing systems of the....
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....ucture institution shall be permanent or for such period not less than one year as may be specified by the Authority. 11. Regulatory Fee A recognised market infrastructure institution shall pay the regulatory fee as specified by the Authority from time to time. 12. Renewal of recognition The provisions of these regulations, as applicable to the grant of recognition shall also apply in relation to an application for renewal of recognition of a market infrastructure institution. 13. Withdrawal of recognition The recognition granted to a market infrastructure institution may be withdrawn by the Authority after giving a reasonable opportunity of being heard: Provided that the recognition granted to a stock exchange or a clearing corporation shall be withdrawn in the manner provided under section 5 of the SCRA. 14. Net Worth Requirements (1) A recognised market infrastructure institution shall have net worth of at least USD 3 million at all times. (2) If required, as a risk management measure, the Authority may prescribe higher net worth for a recognised market infrastructure institution based on the nature and scale of business of the entity. 15. A reco....
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.... recognised in India or a Foreign Jurisdiction with a minimum of twenty-six per cent. of the paid-up equity share capital of the recognised depository; or (b) a consortium of market infrastructure institutions with a minimum of fifty-one per cent. of the paid-up equity share capital of the recognised depository held by such consortium: Provided that the stock exchange(s) recognised in India, an IFSC or a Foreign Jurisdiction shall have fifty-one per cent. or more shareholding within the consortium. (2) Any other person in India, an IFSC or a Foreign Jurisdiction shall not at any time, directly or indirectly, either individually or together with persons acting in concert, acquire or hold more than twenty-five per cent. of the paid-up equity share capital in the recognised depository. 19. (1) Any person who acquires equity shares or voting rights, in a recognised market infrastructure institution, directly or indirectly, either individually or together with persons acting in concert, of ten per cent. or more of the paid-up equity share capital shall not have any conflict of interest and obtain prior approval of the Authority. (2) The market infrastructure i....
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.... (ii) a recovery proceeding has been initiated against the person by a financial regulatory authority and is pending; (iii) an order for winding up has been passed against the person for malfeasance; (iv) the person, or any of its whole-time directors or managing partners, has been declared insolvent and has not been discharged; (v) an order, restraining, prohibiting or debarring the person or any of its whole-time directors or managing partners, from dealing in financial products or financial services or from accessing the securities market, has been passed by the Authority or any other regulatory authority and a period of three years from the date of the expiry of the period specified in the order has not elapsed; (vi) any other order against the person, or any of its whole-time directors or managing partners, which has a bearing on the securities market, has been passed by the Authority or any other regulatory authority, and a period of three years from the date of the order has not elapsed; (vii) the person has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force; (viii) t....
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....nce review as may be specified by the Authority; (i) The appointment of managing director shall be for a term not exceeding five years subject to maximum age limit of 70 years: Provided that the managing director may be re-appointed subject to approval of the Authority. (3) The roles and responsibilities of the governing board of a recognised market infrastructure institution should be clearly specified and the procedures for its functioning, including procedures to identify, address, and manage conflicts of interest should be documented. (4) The governing board of a recognised market infrastructure institution shall review the overall performance and the performance of its individual directors regularly. 25. Code of Conduct for directors and key management personnel (1) Every director and key management personnel of a recognised market infrastructure institution shall abide by such Code of Ethics and Code of Conduct as may be specified by the Authority. (2) The Authority may, for any failure by the directors or key management personnel to abide by these regulations or Code of Ethics and conduct or in case of any conflict of interest, either upon a ....
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....ration shall evolve a detailed framework for the settlement guarantee fund, subject to approval of the Authority. 32. Trading Hours and Settlement (1) The trading hours for all product categories shall be as decided by the recognised stock exchanges, based on cost-benefit analysis, but shall not exceed 23 hours and 30 minutes in a day and settlement shall be done at least twice a day. (2) A recognised stock exchange and a recognised clearing corporation shall ensure that the risk management system and infrastructure are commensurate to the trading hours at all times. 33. Risk Management (1) A recognised stock exchange and a recognised clearing corporation shall have a sound risk management system and infrastructure for comprehensively managing risks. (2) A recognised stock exchange shall evolve a detailed framework for the applicable position limits for each product to be traded. (3) A recognised clearing corporation shall evolve a robust risk management framework and shall comply with the following: (a) The risk management framework shall be in line with the Committee on Payments and Market Infrastructures (CPMI) and International Organization of Secu....
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....rity in the manner as may be specified by the Authority from time to time. 37. Utilization of profits and investments (1) The utilization of profits and investments by a recognised stock exchange or a recognised clearing corporation shall be in accordance with the norms specified by the Authority. (2) The recognised stock exchange or recognised clearing corporation shall not carry on any activity involving deployment of funds without prior approval of the Authority: Provided that prior approval of the Authority shall not be required in case of treasury investments if such investments are as per the investment policy approved by the governing board of recognised stock exchange or recognised clearing corporation; Provided further that the recognised stock exchange or recognised clearing corporation may engage in activities involving deployment of funds or otherwise that are unrelated or not incidental to its activity as a stock exchange or clearing corporation, as the case may be, through a separate legal entity and subject to approval of the Authority. 38. Equal, fair and transparent access (1) A recognised clearing corporation shall lay down a policy framework ....
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....No memorandum of association, articles of association or any other constitution document, in so far as they relate to matters specified in section 3 of the SCRA or under these regulations shall be amended except with prior approval of the Authority. 41. Settlement and netting (1) The payment and settlement in respect of a transaction in a recognised stock exchange and recognised clearing corporation shall be determined in accordance with the netting or gross procedure as specified in the bye-laws of such recognised stock exchange and recognised clearing corporation, with the prior approval of the Authority. (2) Payment and settlement in respect of a transaction between parties referred to in sub- regulation (1), effected under the bye-laws of a recognised stock exchange or recognised clearing corporation, shall be final, irrevocable and binding on such parties. (3) When a settlement has become final and irrevocable, the right of the recognised stock exchange or the recognised clearing corporation, as the case may be, to appropriate any collaterals or deposits or margins contributed by the trading member, clearing member or client towards its settlement or other obligati....
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....to where the Central Government of India or the State Government is the issuer of government securities. (2) Where the issuer has appointed a Registrar to the Issue or Share Transfer Agent, the depository shall enter into a tripartite agreement with the issuer and the Registrar to the Issue or Share Transfer Agent, as the case may be, in respect of the securities to be declared by the depository as eligible to be held in dematerialised form. 47. Systems and Procedures A recognised depository shall have systems and procedures which will enable it to co-ordinate with the issuer or its agent, and the participants, to reconcile the records of ownership of securities on a daily basis. 48. A recognised depository shall have adequate mechanisms for the purposes of reviewing, monitoring and evaluating the depository's controls systems, procedures and safeguards. 49. (1) A recognised depository shall ensure that the integrity of the automatic data processing systems is maintained at all times. (2) A recognised depository shall take all precautions necessary to ensure that the records are not lost, destroyed or tampered with and in the event of loss or destruction, ensure t....
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....red to be eligible for dematerialisation in the depository; and (i) such other records as may be specified by the Authority from time to time. (2) A recognised depository shall intimate the Authority the place where the records and documents mentioned at sub-regulation (1) are maintained. (3) A recognised depository shall maintain all records and documents as provided in sub-regulation (1), in electronic retrieval form for a minimum period of twenty years. 58. Co-operation A recognised depository shall extend all such co-operation to the beneficial owners, issuers, issuers' agents, custodians of securities, other depositories and clearing corporations as is necessary for the effective, prompt and accurate clearance and settlement of securities transactions and conduct of business. 59. Pledge A recognised depository shall have in its bye-laws, the procedure for creation of pledge by beneficial owners on a security owned by it. 60. Equal, fair and transparent access A recognised depository shall ensure equal, unrestricted, transparent and fair access to all persons without any bias towards its associates and related entities. CHAPTER VI MISCELLA....
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....irector, chairperson, officer and other employee of such market infrastructure institution, shareholder or associate shall cooperate with the Authority. (3) The Authority shall after consideration of inspection or investigation report take such action as it may deem fit and appropriate. 67. Directions by the Authority Without prejudice to the exercise of its powers under the provisions of the IFSCA Act and rules and regulations made thereunder, the Authority may, either suo motu or on receipt of any information or during pendency of any inspection, inquiry or investigation or on completion thereof, in the interest of public or trade or investors or the securities market in an IFSC, issue such directions as it deems fit. 68. Appointment of Auditor by the Authority The Authority shall have the power to appoint an auditor to inspect or investigate, into the books of account, records, documents, infrastructures, systems and procedures or affairs of a recognised market infrastructure institution. 69. Authority to recover the expenses The Authority shall be entitled to recover from the recognised market infrastructure institution such expenses including fees paid to ....