NSE asks members to submit risk-based supervision data

Moving ahead with new framework for risk-based supervision of market entities, leading bourse NSE today asked its members to collate and submit details in this regard for the first half of the current fiscal.
The data has to be submitted only in electronic form by March 16.
In a circular today, the NSE said members are "to collate data/details required for the risk assessment template for the half year ended September 30, 2014".
A similar circular was also issued by BSE in February.
The Securities and Exchange Board of India decided to adopt this new supervision model, based on level of risks posed by a market entity, to help it better regulate the marketplace and strengthen its surveillance system.

The system would comprise data generated by the exchange as well as those provided by the members. The exchanges are providing an electronic interface to the members to enable them submit the data, which will be collated and analysed by the exchange system.

The new model, derived from the global best practices, follows four distinct steps -- assessing the risk posed by a market entity, assigning 'risk and impact rating' to it, determining supervisory risk rating score and then adopting a suitable supervisory approach.
Various market entities would be divided broadly into four groups -- very low risk, low risk, medium risk and high risk -- and the quantum of surveillance and number of inspections would increase as per the risk level.

Risk and impact ratings would be assigned to each entity on a scale of 0-4, with zero rating being for those with completed absence of any risk parameters, and a score of four would indicate "very high risk or very low compliance".
The move would help the existing surveillance system take care of most of the smaller offences, so that the investigation resources are utilised more effectively to tackle serious violations in the market place.
Under the new model, members have to provide various details including those about the branches, sub- brokers and associated persons, as also information about their inspections and facilities like voice recording available there.

The details would also include the instances of regulatory non-compliance by sub-brokers or associates and the action taken in that regard.
The details of clients categorised as high-risk clients, such as Politically Exposed Persons, clients from countries facing global sanctions and NRIs etc also need to be given.