Sebi: Annulment requests must come within an hour

The new policy would be in addition to the existing policy on annulment for trades resulting from manipulation or fraud

The Securities and Exchange Board of India (Sebi) has unveiled a policy on annulment of trades. An annulment is when an executed trade is held void and the transaction is reversed. A broker will have to submit any request for annulment within 30 minutes, and up to one hour in case of exceptional circumstances, according to a circular put out on the regulator’s website on Thursday.

“Stock brokers shall submit such requests to the stock exchange within 30 minutes from execution of trade(s), which is sought to be annulled. However, stock exchange may consider requests received after 30 minutes, but no longer than 60 minutes, only in exceptional cases and after examining and recording reasons for such consideration,” said the circular.

 

The exchanges are required to inform details of such requests to all stock brokers in a time-bound manner. They are required to decide on such requests by start of the next day. Decisions are to be published on the exchange website. An alternative to a complete annulment has been suggested by way of a price resetting mechanism.

“…stock exchanges may consider resetting the price of trade(s) under consideration to an appropriate price(s), if price reset is deemed to be a less disruptive mechanism as compared to trade annulment,” it said. This is to be done only in exceptional circumstances.

The new annulment policy would be in addition to the existing policy on annulment for trades resulting from manipulation or fraud.

Brokers can request a review of the exchange decision on annulment. They are required to give a request before the payout deadline. A review committee is to look into such requests. It must provide its decisions within 30 days.

 

Exchanges can charge an annulment application fee equal to five per cent of the value of the trade. This can range between a minimum of Rs 1 lakh to a maximum of Rs 10 lakh. The amount goes into the exchange’s investor protection fund. The exchange can also penalise brokers who put in erroneous orders, it said.

Exchanges can put in place additional requirements on the issue of annulment, according to the circular. The new policy is to be implemented within one month.