NSE CLEARING LIMITED

Registered Office: Exchange Plaza, Plot no. C-1, Block G, Bandra-Kurla Complex, Bandra
(East), Mumbai 400 051

BYE LAW S

CAPITAL MARKET SEGMENT

ARRANGEMENT OF CHAPTERS

Chapter Description

I. Definitions

II. Clearing Segments

III. Committee(s)

IV. Regulations

V. Clearing Members

VI. Clearing and Settlement of Deals

VII. Dealings by Clearing Members

VIII. Margins

IX. Rights and Liabilities of Clearing Members and Constituents

X. Arbitration

XI. Default

XII. Core Settlement Guarantee Fund

XIII. Miscellaneous

XIV. Individually Segregated Collateral Facility – Tri-Party Repo

XV. Winding Down of Clearing Corporation

1
 CHAPTER I : DEFINITIONS

1. APPROVED INTERMEDIARY

“Approved Intermediary” means NSE Clearing Limited registered with Securities and
Exchange Board of India as such under the Securities Lending Scheme, 1997

2. BOARD
"Board" means Board of Directors of NSE Clearing Limited.

3. BYELAW S
Unless the context indicates otherwise, Byelaws means the Byelaws of the Clearing
Corporation for the time being in force.

4. CLEARING AND SETTLEMENT

"Clearing and Settlement" means clearing or settlement or clearing and settlement of deals in
such manner and subject to such conditions as may be specified by the Relevant Authority
from time to time, unless the context indicates otherwise.

5. CLEARING BANK(S)
Clearing Bank(s) is such bank(s) as the Clearing Corporation may appoint to act as a funds
settling agency, for the collection of margin money for all deals cleared through the
Clearing Corporation and any other funds movement between clearing members and the
Clearing Corporation and between clearing members as may be directed by the Clearing
Corporation from time to time.

6. CLEARING CORPORATION
Clearing Corporation means NSE Clearing Limited.

7. CLEARING MEMBER
"Clearing Member" means a member of the Clearing Corporation and includes all
categories of clearing members as may be admitted as such by the Clearing Corporation but
does not denote the shareholders of the Clearing Corporation.

8. CLEARING SEGMENTS
"Clearing Segments" means the different segments or divisions for clearing and settlement of
deals as maybe classified by the relevant authority from time to time.

9. Client /Constituent

A Client/Constituent means a person, on whose instructions and on whose account the

clearing member clears and settles deals. For this purpose, the term client shall include all
registered constituents of trading members of Specified Exchange.

Explanation1:

The terms ‘Constituent’ and ‘Client’ are used interchangeably in these B yelaws, Rules &
Regulations and shall have the same meaning assigned herein.

2
 Explanation2:

For the purpose of Chapters IX, X & XI, the term ‘Constituent’ in relation to trades shall also
include a trading member where such trades done on the Specified Exchange are cleared
and settled on his behalf by a Clearing Member.

10. DEAL
"Deal" means, unless the context indicates otherwise, a deal which is admitted to be cleared
and settled through the Clearing Corporation.

11. DELIVERINGMEMBER
"Delivering Member" means a clearing member who has to deliver or has delivered
documents including original share/bond/other securities certificates, transfer documents as
required for delivery in fulfillment of contract to which these Rules, Bye Laws and
Regulations apply unless the context indicates otherwise.
12. NOVATION
“Novation” means the act of a clearing corporation interposing itself between both parties of
every trade, being the legal counterparty to both.

13. PARTICIPANT

“Participant” means a person registered as such with NSE Clearing Limited for the
purpose of securities lending and borrowing.

14. RECEIVING MEMBER

"Receiving Member" means a clearing member who has to receive or has received
documents including original share/bond/other securities certificates, transfer documents as
required for delivery in fulfillment of contracts to which these Rules, Bye Laws and
Regulations apply unless the context indicates otherwise.

15. REGULATIONS

"Regulations" means Regulations of the Clearing Corporation for the time being in force
and includes business rules, code of conduct and such other procedures and regulations,
circulars, directives and orders as issued by the relevant authority from time to time for the
operations of the Clearing Corporation.

16. RELEVANT AUTHORITY

"Relevant Authority" means the Board, or such other authority as specified by the Board
from time to time as relevant for a specified purpose.

17. RULES
Unless the context indicates otherwise, "Rules" means the Rules of Clearing Corporation for the
time being in force.

18. SEBI
"SEBI" means the Securities and Exchange Board of India.

19. SECURITIES

3
 "Securities" shall have the meaning assigned to it in the Securities Contracts (Regulation)
Act, 1956 and shall also include such other class of instruments or products, monetary
or non-monetary, scrip-less or otherwise, as may be admitted to be cleared and settled
through the Clearing Corporation.

20. SECURITIES LENDING AND BORROW ING SCHEME

“Securities lending and Borrowing Scheme” means a Scheme framed by National Securities
Clearing Corporation Limited as an Approved Intermediary for facilitating securities lending and
borrowing.

21. CORE SETTLEMENT GUARANTEEFUND

“Core Settlement Guarantee Fund” means a fund established and maintained in
accordance with the relevant provisions of the Bye Laws.

22. SPECIFIEDEXCHANGE

"Specified Exchange" or "specified exchange" means a recognised stock exchange under

the Securities Contracts (Regulation) Act, 1956 dealings on which may be admitted to be
cleared and settled by the Clearing Corporation subject to such terms and conditions as may
be specified from time to time bythe relevant authority.

For the purpose of this definition, the following exchange is specified as the Specified
Exchange:

1. National Stock Exchange of India Limited

23. TRADING MEMBER

"Trading Member" or "trading member" means any person admitted as a member in any
Exchange in accordance with the Rules, Bye Laws and Regulations of that Exchange.

Note: The terms defined above shall mean the same when used in lower case in the Rules,
Bye Laws and Regulations, unless the context indicates otherwise.

24. RELEVANT COMMITTEE

‘Relevant Committee’ shall mean the Member and Core Settlement Guarantee Fund Committee or such
other committee as stipulated by SEBI from time to time.

4
 CHAPTER II: CLEARING SEGMENT S

The Clearing Corporation may establish more than one clearing segment as may be specified by the
relevant authority from time to time. Deals which may be admitted to the different clearing segments
for the purpose of clearing and settlement will be specified by the relevant authority from time to
time.

5
 CHAPTER III: COMMITTEE(S)

1. Committee(s) may be appointed by the Board for the purposes of managing the day to day
affairs of the different segment(s) of the Clearing Corporation in such manner as laid down in
the Rules.

2. The Committee(s) of each clearing segment shall have such responsibilities and powers
as maybe delegated to it by the Board.

6
 CHAPTER IV: REGULATIONS

1. The Board may prescribe Regulations from time to time for the functioning and
operations of the Clearing Corporation and to regulate the functioning and
operations of the clearing members of the Clearing Corporation.

2. Without prejudice to the generalit y of the above, the Board may prescribe
regulations from time to time, inter alia, with respect to:
(1) norms, procedures, terms and conditions for admission of Exchanges;
(2) norms, procedures, terms and conditions to be complied with for admission of deals for
clearing and settlement bythe Clearing Corporation;
(3) norms, procedures, terms and conditions for clearing and settlement of deals for
different clearingsegments and different securities and instruments;
(4) forms and conditions of deals to be entered into, and the time, mode and
manner for performance of deals between clearing members inter se or
between clearing members and their constituents;
(5) norms, procedures, terms and conditions for guaranteed settlement by the Clearing
Corporation;
(6) prescription, from time to time, and administration of penalties, fines and other
consequences, including suspension/expulsion of clearing members from the
Clearing Corporationfor defaults;
(7) norms, procedures, terms and conditions for imposition and administration of different
types of margins and other charges and restrictions that may be imposed by the
Clearing Corporation from time to time.
(8) determination from time to time, of fees, system usage charges, deposits, margins and
other monies payable to the Clearing Corporation by clearing members and the scale of
clearing and other charges that may be collected by clearing members;
(9) supervision of the clearing operations and promulgation of such Business Rules and Codes
of Conduct as it may deem fit;

(10) inspection and audit of records and books of accounts;

(11) settlement of disputes, complaints, claims arising between clearing members inter-se
as well as between clearing members and persons who are not clearing
members relating to any deal in securities cleared and settled through the Clearing
Corporation including settlement by arbitration;
(12) norms, procedures, terms and conditions for arbitration;
(13) administration, maintenance and investment of the corpus of the Fund(s) set up by
the ClearingCorporationincludingCore SettlementGuarantee Fund(s);

(14) establishment, norms, terms and conditions, functioning and procedures of clearing house,
clearing through depository or other arrangements including custodial services for clearing
and settlement;
(15) norms, procedures, terms and conditions in respect of, incidental to or consequential to
closing out of deals;

7
(16) dissemination of information and announcements;
(17) anyother matter as maybe decided by the Board.

8
 CHAPTER V: CLEARING MEMBERS

1. The relevant authority is empowered to admit clearing members in accordance with Rules
and Regulations subject to the minimum financial requirements prescribed by SEBI. Such
Clearing Member shall pay such fees, security deposits and other monies as may be
specified by the Board or the relevant authority from time to time, on admission as Clearing
Member and for continued admission. The fees, security deposits, other monies and any
additional deposits paid, whether in the form of cash, bank guarantee, securities or
otherwise, with the Clearing Corporation, by a Clearing Member from time to time, shall
be subject to a first and paramount lien for any sum due to the Clearing Corporation in
any Clearing Segment and all other claims against the Clearing Member for due
fulfillment of engagements, obligations and liabilities of Clearing Members arising out of
or incidental to any dealings made subject to the Byelaws, Rules and Regulations of the
Clearing Corporation in any Clearing Segment. The Clearing Corporation shall be
entitled to adjust or appropriate such fees, deposits and other monies for such dues and
claims, to the exclusion of the other claims against the Clearing member, without any
referenceto the Clearing member.

The proceeds arising out of invocation of the bank guarantees furnished by the Clearing
Member in lieu of security deposits or additional deposits, on being invoked by the
Clearing Corporation, shall not be reckoned as part of the Clearing Member’s deposits for
the purpose of enablement or exposure, etc.

The Clearing Corporation may utilise the proceeds of the bank guarantee so invoked for the
purpose of settlement of claims / dues of clients, Clearing Corporation, the stock exchange
or SEBI against the Clearing Member. The surplus, if any, shall be refunded to the Clearing
Member.

2. Clearing member of any segment may clear and settle deals through the Clearing
Corporation pertinent to that segment in such manner and mode and subject to such terms
and conditions and procedures as maybe specified for the clearingmember.

3. Clearing members may clear and settle deals either on their own account or on behalf
of th eir clients unless otherwise specified by the relevant authority and subject to such
terms and conditions which the relevant authority may prescribe from time to time.

9
 CHAPTER VI: CLEARING AND SETTLEMENT OF DEALS

A. DEALS FOR CLEARING AND SETTLEMENT

1. CLEARING AND SETTLEMENT OF DEALS

(1) The Clearing Corporation shall clear and settle such deals as provided in the Bye
Laws and Regulations and save as so provided, no other deals shall be cleared and
settled.

(2) Without prejudice to the generalit y of the above, the relevant authority may in its
discretion and subject to such conditions as it may deem fit admit any other deals.

2. ADMISSION OF DEALS

(1) Clearing and settlement shall be permitted on the Clearing Corporation in deals which
are from time to time admitted on the clearing segments by the relevant authority in
accordance with the provisions of the Bye Laws and Regulations.

(2) The relevant authority may specify securities from time to time dealings in which
may be admitted in accordance with the provisions of the Bye Laws and Regulations in
that regard.

(3) The relevant authority may specify stock exchanges from time to time dealings on which
may be admitted for clearing and settlement by the Clearing Corporation in accordance
with the provisions of the Bye Laws and Regulations of the Clearing Corporation.

3. CONDITIONS AND REQUIREMENTS OF CLEARING AND SETTLEMENT

The relevant authority may grant admission of deals dealt in the Exchange provided all the
conditions and requirements specified in the Bye Laws and Regulations and such other
conditions and requirements as the relevant authority may prescribe from time to time are
complied with.

4. REFUSAL OF ADMISSION OF DEALS

The relevant authority may, in its discretion, approve admission of deals or defer, or reject
admission of deals for clearing and settlement on the Clearing Corporation, subject to such
terms as it deems fit.

5. DEALS IN PROVISIONAL DOCUMENTS

(1) The relevant authority may, in its discretion, admit deals in Provisional Documents.

(2) Provisional Documents for the purpose of these Bye Laws and Regulations denotes
Coupons, Fractional Certificates, Letters of Renunciation, or transferable Letters of
Allotment, Acceptance or Application or options or other rights or interests in
securities, warrants issued or to be issued by an issuer or other similar documents
in respect of an issuer whose securities are sought to be admitted to be cleared
and settled through the Clearing Corporation.

6. SPECIFIC DEALS
The relevant authority may permit in appropriate cases as it may at its discretion decide
from time to time specific deals to be cleared and settled through the Clearing Corporation in
case of securities which are not admitted or are for the time being prohibited or
suspended.
10
7. SUSPENSION OF ADMISSION OF DEALS
The relevant authority may suspend at any time the admission of deals including of any
security of specified exchange on clearing segment for such period as it may determine
and reinstate such deals subject to such conditions as it maydeem fit.

8. W ITHDRAW AL OF ADMISSION OF DEALS

The relevant authority may where it deems necessary withdraw the admission to dealings
of a specified exchange either for breach of or non-compliance with any of the
conditions or requirements of admission of dealings or for any other reason whatsoever.

9. READMISSION OF DEALS
The relevant authority in its discretion may readmit deals of a specified exchange which has
been previously withdrawn.

B. CLEARING AND SETTLEMENT OF DEALS

10. CLEARING AND SETTLEMENT

Settlement shall be effected by clearing members giving and receiving deliver y and
paying and receiving funds as may be specified by the relevant authority from time to
time in the Bye Laws and Regulations.

10A. Settlement Finality

(1) The payment and settlement in respect of a deal shall be determined in accordance with
the netting or gross procedure as specified by the relevant authority with the prior approval
of SEBI in the circulars issued from time to time.

(2) Payment and settlement in respect of a deal shall be final, irrevocable and binding on the
Clearing Members.

(3) When a settlement has become final and irrevocable, the right of the Clearing Corporation
to appropriate any collaterals or deposits or margins contributed by the clearing member
towards its settlement or other obligations in accordance with these Byelaws shall take
priority over any other liability of or claim against the said clearing member.

(4) For removal of doubts, it is hereby declared that the settlement, whether gross or net,
referred to in Clause (1) above is final and irrevocable as soon as the money, securities or
other transactions payable as a result of such settlement is determined, whether or not
such money, securities or other transactions is actually paid.

(5) For the purpose of Clause (1) above, "netting" means the determination by Clearing
Corporation of net payment or delivery obligations of the clearing members 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 termination by the
Clearing Corporation, in such circumstances as the Clearing Corporation may specify in
Byelaws, of the deals admitted for settlement at a future date, so that only a net claim be
demanded, or a net obligation be owed.

(6) For removal of doubts, it is hereby declared that claims and obligations arising out of the
termination by the Clearing Corporation referred to in clause (5) above shall mean claims
and obligations arising out of deals closed out in accordance with these Byelaws.

10B. Right of Clearing Corporation

The right of clearing corporation to recover the dues from its clearing members, arising from
11
 the discharge of their clearing and settlement functions, from the collaterals, deposits and the
assets of the clearing members, shall have priority over any other liability of or claim against
the clearing members.

11. PRIVITY OF CONTRACT

(1) Except as provided herein, clearing members giving and receiving delivery as provided
in the B ye Laws and Regulations shall be deemed, notwithstanding that no direct
contract may exist between them, to have made a contract with each other as sellers
and bu yers. However the rights and liabilities of delivering and receiving member in
relation to their immediate contracting party shall not be deemed to be affected
thereb y except that the selling member (unless he be himself the delivering member)
shall be released from all responsibilit y in regard to the title, ownership, genuineness,
regularity and validity of the documents received by the receiving member and in
regard to the loss and damages arising therefrom, which shall be dealt with in
accordance with the provisions of Bye Laws and Regulations thereof.

(2) In cases where the Clearing Corporation may specify either generally or specifically,
clearing members giving and receiving deliver y and paying and receiving funds as
provided in the B ye Laws and Regulations shall be deemed, notwithstanding that no
direct contract exists between them, to have made a contract with the Clearing
Corporation through full novation as sellers and buyers and between themselves as
delivering and receiving members; provided further however that in such event the
rights and liabilities of delivering and receiving member with the Clearing Corporation
shall not be deemed to be affected thereb y except that the Clearing Corporation shall
not be responsible in respect of the title, ownership, genuineness, regularity and validity
of the documents delivered or received and in regard to the loss and damages arising
therefrom, which shall be dealt with in accordance with the provisions of Bye Laws and
Regulations.

(3) Notwithstanding anything contained above, the Clearing Corporation may specify
either generally or specifically, where Clearing Members clearing and settling deals as
provided in the Bye laws and Regulations shall be deemed, notwithstanding that no
direct contract exists between them, to have made a contract between themselves as
buyers and sellers and where such contract shall be submitted with the Clearing
Corporation as the buyer to the seller and as the seller to the buyer.

12. ARRANGEMENT FOR CLEARING AND SETTLEMENT

(1) Clearing and settlement of deals shall be effected by clearing members by adopting and
using such arrangements, systems, agencies or procedures as may be specified by the
relevant authority from time to time. Without prejudice to the generality of the above, the
relevant authority may prescribe or specify from time to time such custodial, depository
and other services for adoption and use by clearing members and their constituents to
facilitate smooth operation of the clearing and settlement arrangement or system.

(2) The clearing and settlement function may be performed by the Clearing Corporation or it
may take assistance of any agency identified by the relevant authority for the purpose.

(3) Save as otherwise expressly provided in the Bye Laws and Regulations, when funds and
securities are cleared and/or settled under a specified arrangement, the settlement
responsibility shall rest wholly and solely upon the counter parties to the contract
and/or the concerned clearing members as the case may be and the Clearing
Corporation shall act as the common agent of the clearing members for receiving or
giving delivery of securities and for receiving and paying funds, without incurring any
liability or obligation as a principal.

12
13. OPERATIONAL PARAMETERS FOR CLEARING

(1) The relevant authority may determine and announce from time to time operational
parameters regarding clearing of deals through the Clearing Corporation which the
clearing members shall adhere to.

(2) The operational parametersmay, inter alia, include:

(a) clearing / exposure limits allowed which may include clearing / exposure limits with
reference to networth and capital adequacy norms;
(b) clearing volumes and limits at which it will be incumbent for clearing members to intimate
the Clearing Corporation;
(c) fixation of delivery lots for different settlement types;
(d) other matters which may affect smooth operation of clearing of deals keeping in view
larger interest of the public;
(e) determining types of deals permitted for a clearing member and for a security;
(f) determining functional details of the clearing and settlement system including the
system design, user infrastructure and system operation.

14. CLEARING HOURS

(1) The hours for clearing and settling of different segments of the Clearing Corporation
shall be during such time as may be decided by the relevant authority from time to
time. The relevant authority m ay, from time to time, specif y clearing hours for different
types of deals and different segments.

(2) The relevant authority may declare a list of holidays in a calendar year. The relevant
authority may from time to time alter or cancel any of the holidays fixed in accordance
with these provisions. It may, for reasons to be recorded, suspend clearing and
settlement operations on days other than or in addition to holidays.

15. DELIVERY OF SECURITIES

(1) Delivery and settlement of all securities, documents and papers and payment in respect
of all deals shall be in such manner and such place(s) as may be specified by the
relevant authority from time to time.
(2) The relevant authority shall specify from time to time, the securities, documents
and papers which, when delivered in specified manner, shall constitute good
delivery. Where circumstances so warrant, the relevant authority may
determine, for reasons to be recorded, whether or not a delivery constitutes a good
delivery, and such findings shall be binding on parties concerned. W here the
relevant authority determines that a delivery does not constitute a good delivery,
the delivering party shall be required to substitute good delivery instead within
such time as may be specified.

(3) The norms and procedures for delivery with respect to market lot, odd lot, minimum
lot, part delivery, delivery of partly paid securities etc., shall be as specified by the
relevant authority from time to time.

(4) The requirements and procedures for determining disputed deliveries or defective
deliveries, and measures, procedures and system of resolving the dispute or defect
in deliveries or of consequences of such deliveries or their resolution shall, subject to
these Bye Laws, be as specified by the relevant authority from time to time.

16. CLOSING OUT

13
(1) A deal admitted for clearing and settlement may be closed out on failure of a clearing member
to comply with any of the provisions relating to delivery, payment and settlement of deals or on
any failure to fulfill the terms and conditions subject to which the deal has been made, or such
other circumstances as the relevant authority may specify from time to time. The deal may be
closed out by the Clearing Corporation in such manner, within such time frame and subject to
such conditions and procedures as the relevant authority may prescribe from time to time.

(2) W ithout prejudice to the generality of the foregoing, the relevant authority may close out
deals, inter alia, by buying in or selling out against a clearing member as follows:-
(a) In case of the selling clearing members, on failure to complete delivery on the due date; and
(b) In case of the buying clearing members, on failure to pay the amount due on the due date,
(c) and any loss, damage or shortfall sustained or suffered as result of such closing out shall
be payable by the clearing members who failed to give due delivery or to pay amount due.

(3) In case of default by a clearing member to the Clearing Corporation arising out of the positions
in one or more clearing segments, the relevant authority shall be entitled to close-out the positions
of a clearing member in any or all clearing segments.

(4) The Clearing Corporation shall be entitled to hold the positions in its own name, either fully or
part thereof in the above clause till expiry at its discretion subject to such terms and conditions as
it may deem fit.

16A. BORROW ING OF SECURITIES

Notwithstanding anything contained in Byelaw 16 hereinabove, in the event of failure of the

Delivering Member to complete delivery of specified securities on the due date, the Clearing
Corporation may borrow the securities specified by it on behalf of such Delivering Member in
such manner, within such time frame and subject to such conditions and procedures as the
relevant authority may prescribe from time to time, and deliver them to the Receiving
Member(s) and / to complete the delivery. Such Delivering Member shall return the specified
securities within the time stipulated by the relevant authority together with such fees and
charges as may be specified by the relevant authority.

In the event of failure of the Delivering Member to return the securities borrowed by the
Clearing Corporation on its behalf within the stipulated time, the Clearing Corporation shall buy
the securities on behalf of the member in the manner and method specified by the relevant
authority and may recover the amount thereof from such member together with such other fees and
charges as may be specified by the relevant authority.

In the event the Clearing Corporation fails to buy-in the securities to be returned on behalf of such
borrowing Delivering Member, the Clearing Corporation may effect close out in respect of the
securities, to the extent that it could not be bought in, in the manner specified by the relevant
authority and recover the amount of such close out and fees from such member.

17. FAILURE TO MEET OBLIGATIONS

In the event a clearing member fails to meet obligations to the Clearing Corporation arising out of
clearing and settlement operations of admitted deals, the relevant authority may charge such
interest, impose such penalties and fines and take such disciplinary action against the clearing
member as it may determine from time to time. Any disciplinary action which the relevant
authority takes pursuant to the above shall not affect the obligations of the clearing member to
the Clearing Corporation or any remedy to which the Clearing Corporation may be entitled under
applicable law.

14
 CHAPTER VII: DEALINGS BY CLEARING MEMBERS

1. JURISDICTION
(1) All deals admitted by the Clearing Corporation for clearing and settlement shall be
deemed to have been entered into in the city of Mumbai unless provided otherwise
expressly by the relevant authority.

(2) The relevant authority may, from time to time, specify deals as subject to a particular
jurisdiction, having regard to the t ype or nature of the deal, the exchange on which the
deal was struck and other relevant factors.

2. RECORD FOR EVIDENCE

The record of the Clearing Corporation as maintained by a central processing unit or a cluster
of processing units or computer processing units, whether maintained in any other manner
shall constitute the agreed and authentic record in relation to any deals cleared and settled
through the Clearing Corporation. For the purposes of any disputes regarding clearing and
settlement of deals the records as maintained by the Clearing Corporation shall constitute
valid evidence in any dispute or claim between the constituents and the clearing member of
the Clearing Corporation or between the clearing members of the Clearing Corporation
inter-se or between the clearing members and the Clearing Corporation.

3. CLEARING MEMBER ONLY PARTIES TO DEALS

The Clearing Corporation does not recognise as parties to deals any persons other than its
own clearing members, and every clearing member is directly and wholly liable in
accordance with whom such clearing member has any deal for due fulfillment of the deal or
to the Clearing Corporation as may be specified by the relevant authority, whether such
deal be for account of the clearing member effecting it or for account of a constituent.

4. ALL DEALS SUBJECT TO RULES, BYE LAW S AND REGULATIONS

All deals shall be made subject to the Rules, Bye Laws and Regulations of the Clearing
Corporation and this shall be a part of the terms and conditions of all such deals and the
deals shall be subject to the exercise by the relevant authority of the powers with respect
thereto vested in it by the Bye Laws, Rules and Regulations of the Clearing Corporation.

5. INVIOLABILITY OF ADMITTED DEALS

(1) All the dealings in securities on the Clearing Corporation made subject to the Byelaws,
Rules and Regulations of the Clearing Corporation shall be in- violable and shall be
cleared and settled in accordance with the Byelaws, Rules and Regulations of the
Clearing Corporation. However, the Clearing Corporation may by a notice annul the
deal(s) on an application by a Clearing Member in that behalf, if the relevant authority is
satisfied after hearing the other party/parties to the deal(s) that the deal(s) is /are fit for
annulment on account of fraud or willful misrepresentation or material mistake in the
deal.

(2) Notwithstanding anything contained in clause (1) above, the Clearing Corporation may, to
protect the interest of investors in securities and for proper regulation of the securities
market, suo motu annul deal(s) at any time if the relevant authority is satisfied for
reasons to be recorded in writing that such deal(s) is/ are vitiated by fraud, material
mistake, misrepresentation or market or price manipulation and the like.

(3) Any annulment made pursuant to clauses (1) and (2) above, shall be final and binding
upon the parties to deal(s). In such an event, the Clearing Member shall be entitled
to cancel the relevant deal(s) with its constituents.

15
6. DEALS BY REPRESENTATIVE CLEARING MEMBERS
A clearing member may authorise another clearing member to act as a representative for a
specified period with the prior permission of the relevant authorit y.

7. INDEMNITY
The Clearing Corporation shall not be liable for any activity of the clearing member or any
person acting in the name of the clearing member whether authorised or unauthorised
including deals cleared and settled through the Clearing Corporation save and except as
and to the extent provided in the Bye Laws and Regulations.

8. POTENTIAL DEFAULT BY CLEARING MEMBER

(1) The Clearing Corporation shall act in accordance with the circulars issued by SEBI from time to
time with respect to Standard Operating Procedure in cases of Clearing Member leading to default.

(2) In accordance with the Circular(s) issued by SEBI under the above Byelaw, the Clearing
Corporation shall issue instructions to the bank(s) concerned to freeze the bank account(s)
maintained by a Clearing Member, for all debits / withdrawal by the Clearing Member in the event of
potential default by such a Clearing Member in meeting its obligations to a recognised stock
exchange / Clearing Member / Clearing Corporation and / or repayment of funds / securities to his /
its clients.

16
 CHAPTER VIII: MARGINS

1. MARGIN REQUIREMENTS
(1) The relevant authorit y may from time to time prescribe requirements of margins
for deals cleared and settled through the Clearing Corporation and the clearing
member shall furnish such margin as a condition precedent.

(2) Without prejudice to clause (1) above, the relevant authority may provide cross
margin benefit for deals cleared and settled through the Clearing Corporation
for such positions in one or more clearing segments subject to such terms and
conditions as maybe prescribed from time to time.

(3) Ever y Clearing Member has a continuing obligation to maintain margins at

such levels and during such periods as may be stipulated by the
Clearing Corporation from time to time.

2. FORM OF MARGIN
The margins to be provided by a clearing member under the Bye Laws and Regulations shall
be in cash. The relevant authority may at its discretion accept deposit receipts, guarantee of
a bank(s) approved by the relevant authority or securities approved by it or such other mode
as may be approved and subject to such terms and conditions as the relevant authority may
impose from time to time. Any such substitute like deposit receipt, securities approved by it
or any other mode duly approved shall be deemed to have been pledged and/or
hypothecated as the case may be in favour of the Clearing Corporation.

3. QUANTUM OF MARGIN
The clearing member depositing margins, in the form of securities by way of pledge or
otherwise or in such other mode as may be specified by the relevant authority from time
to time, shall alwa ys maintain the value thereof at not less than the quantum of margin
required for the time being covered by them by providing further security to the satisfaction of
the relevant authority which shall determine the said value and whose valuation shall
conclusively fix the amount of any deficiency to be made up from time to time.

4. MARGIN TO BE HELD BY THE CLEARING CORPORATION

The margins shall be held by the Clearing Corporation and when they are in the form of bank
deposit receipts and securities such receipts and securities may be transferred to such
persons or to the name of a custodian or such other entity approved by the Clearing
Corporation. All margin deposits shall be held by the Clearing Corporation and/or by the
approved persons and/or by the approved custodian in such form and on such account as the
Clearing Corporation may deem fit without any right whatsoever on the part of the depositing
clearing member or those in its right to call in question the exercise of such discretion.

5. LIEN ON MARGINS
The monies paid by way of margin or bank deposit receipts or other securities or assets
pledged or hypothecated by a clearing member in lieu of margin under the provisions of the
Bye Laws and Regulations shall be subject to a first and paramount lien for all sums due to
the Clearing Corporation. Margin shall be available in preference to all other claims against
the clearing member for the due fulfillment of his obligations and liabilities arising out of or
incidental to any deals made subject to the Bye Laws, Rules and Regulations of the clearing
corporation or anything done in pursuance thereof.

17
6. UTILISATION FOR FAILURE TO MEET OBLIGATIONS

(1) In the event a clearing member fails to meet obligations to the Clearing
Corporation arising out of clearing and settlement operations of such deals as
provided in the Bye Laws and Regulations, the relevant authority shall be entitled
to utilise any amount paid by the said clearing member in the form of margin or any
other paym ent retained by the Clearing Corporation for the purpose of clearing and
settlement.

(2) In case of default by a clearing member to the Clearing Corporation arising out of the
positions in one or more clearing segments, the relevant authority shall be entitled to
utilise the margins or any other monies of such a clearing member in any other
clearing segm ent in order to meet the obligations arising out of such positions.

7. EVASION OF MARGIN REQUIRMENTS FORBIDDEN

A clearing member shall not directly or indirectly enter into any arrangement or adopt any
procedure for the purpose of evading or assisting in the evasion of the margin requirements
specified under the Bye Laws and Regulations.

8. SUSPENSION ON FAILURE TO PAY MARGIN

If a clearing member fails to pay margin as required in the Bye Laws and Regulations, the
relevant authority may take such action as it may deem fit and specified from time to time
includingsuspension.

9. INTEREST, DIVIDEND AND CALLS

(1) The receiving member shall be entitled to receive all vouchers, coupons, dividends, cash
bonus, bonus issues, rights and other privileges which may relate to securities bought
cum voucher, cum coupons, cum dividends, cum cash bonus, cum bonus issues, cum
rights, etc. The delivering member shall be entitled to receive all vouchers, coupons,
dividends, cash bonus, bonus issues, rights and other privileges which may relate to
securities sold ex voucher, ex coupons, ex dividends, ex cash bonus, ex-bonus issues,
ex rights, etc.

(2) The manner, mode, information requirements, alterations, date and timing etc., of
adjustment with respect to vouchers, coupons, dividends, cash bonus, bonus issues,
rights and other privileges between the receiving and delivering member shall be as
specified by the relevant authority from time to time. Save as otherwise provided in the
Bye Laws and Regulations, the clearing members shall be responsible between
themselves and to their constituents for effecting such adjustments.

(3) In respect of a deal in securities which shall become or are exchangeable for new or
other securities under a scheme of reconstruction or reorganisation, the delivering
member shall deliver to the receiving member, as the relevant authority directs, either
the securities contracted for or the equivalent in securities and/or cash and/or other
property receivable under such scheme of reconstruction or reorganisation.

10. CLEARING FEES

The relevant authority may prescribe from time to time fees, charges and recoveries to be
levied on the clearing members in respect of clearing and settlement of deals.

18
 CHAPTER IX: RIGHT S AND LIABILITIES OF CLEARING MEMBERS AND CONSTIT UENT S

1. MARGIN FROM CONSTITUENTS

A clearing member shall demand from its constituent the margin he has to provide under the
Rules, Bye Laws and Regulations in respect of the business done by him for such
constituent. A clearing member shall also demand and collect an initial margin in cash
and securities from its constituent before undertaking to clear his obligations and to
stipulate that the constituent shall pay a margin or furnish additional margin as may be
specified by the Clearing Corporation from time to time. The constituent shall when from
time to time called upon to do so, forthwith pay margins and furnish additional margins as
required under the Rules, Bye Laws and Regulations in respect of his obligations and as
agreed upon by him with the clearing member concerned.

2. CONSTITUENT IN DEFAULT
(1) A clearing member shall not transact business directly or indirectly for a constituent
who to his knowledge is in default to another clearing member unless such
constituent shall have made a satisfactory arrangement with the clearing member who
is his creditor.

(2) On the application of a creditor clearing member who refers or has referred to arbitration
its claim against the defaulting constituent as provided in the Rules, Bye Laws and
Regulations, the relevant authority shall issue orders against any clearing members
restraining them from paying or delivering to the defaulting constituent any monies or
securities up to an amount or value not exceeding the creditor member's claim payable or
deliverable by him to the defaulting constituent in respect of deals subject to the Bye
Laws, Rules and Regulations of the Clearing Corporation, which moneys and securities
shall be deposited with the Clearing Corporation. The moneys and securities deposited
shall be disposed of in terms of the award in arbitration and pending a decree shall be
deposited with the concerned Court when filing the award unless the creditor clearing
member and the defaulting constituent mutually agree otherwise.

3. CLOSING-OUT OF CONSTITUENT'S ACCOUNT

Unless otherwise specified by the relevant authority from time to time, when closing- out
the account of a constituent a clearing member may assume or take over such deals to his
own account as a principal at prices which are fair and justified by the condition of the
market or he may close-out in the open market and any expense incurred or any loss arising
therefrom shall be borne bythe constituent.

4. CLEARING MEMBER NOT LIABLE TO ATTEND TO REGISTRATION OF TRANSFER

Unless otherwise specified by the relevant authority from time to time, a clearing member
shall not be deemed to be under any obligation to attend to the transfer of securities and the
registration thereof in the name of the constituent. If it attends to such work in the ordinary
course or at the request or desire or by the consent of the constituent it shall be deemed to
be the agent of the constituent in the matter and shall not be responsible for loss in transit or
for the company's refusal to transfer or not be under any other liabilit y or obligation other
than that specifically imposed by the Rules, Bye Laws and Regulations. The stamp duty, the
transfer fees and other charges pa yable to the company, the fee for attending to the
registration of securities and all incidental expenses such as postage incurred by the clearing
member shall be borne bythe constituent.

20
5. REGISTRATION O F SECURITIES W HEN IN THE NAME OF CLEARING MEMBER OR
NOMINEE
(1) When the time available to the constituents of a clearing member is not
sufficient for them to complete transfers and lodge the securities for registration before the
closing of the transfer books and where the security is purchased cum interest, dividend,
bonus or rights which the company may have announced or declared, the clearing
member may register the securities in its or its nominee's name and recover the
transfer fee, stamp duty and other charges from the bu ying constituent.
(2) The clearing member shall give immediate intimation to the Clearing Corporation of the
names of such constituents and details of the deals as may be specified by the
relevant authority from time to time. The clearing member shall also give immediate
intimation thereof to the buying constituent and shall stand indemnified for the
consequences of any delay in delivery caused by such action.
(3) The clearing member shall be obliged to re-transfer the security in the name of the
original constituent as soon as it has become ex interest, dividend, bonus or rights.
6. CLOSING-OUT BY CONSTITUENT ON FAILURE TO PERFORM A DEAL

If a clearing member fails to complete the performance of a deal by deliver y or paym ent in
accordance with provisions of the Rules, Bye Laws and Regulations the constituent shall, after
giving notice in writing to the clearing member, close out such deal through any other clearing
member as soon as possible and any loss or damages sustained as a result of such closing
out shall be immediately pa yable by the defaulting clearing member to the constituent. If the
closing out be not effected as provided herein, the damages between the parties shall be
determined on such basis as may be specified by the relevant authority from time to time
and the constituent and the clearing member shall forfeit all further rights of recourse against each
other.
7. COMPLAINT BY CONSTITUENT

When a complaint has been lodged by a constituent with the relevant authority that any
clearing member has failed to perform his dealings, the relevant authority shall investigate the
complaint and if it is satisfied that the complaint is justified it may take such disciplinary action as it
deems fit in accordance with the provisions contained in Chapter IV of the Rules of the Clearing
Corporation.
8. RELATIONSHIP BETW EEN CLEARING MEMBER AND CONSTITUENT

Without prejudice to any other law for the time being in force and subject to these Bye
Laws, the mutual rights and obligations inter se between the clearing members and their
constituents shall be such as may be specified by the relevant authority from time to time.
9. When a complaint has been lodged by a constituent, or on its behalf by the relevant authority,
against a clearing member that such clearing member has failed to satisfactorily perform in its
dealings or for meeting its obligations, then such complaint shall be taken up with the clearing
member and upon -the complaint remaining unresolved within 7 days or within such time as
specified by SEBI from time to time, the complaint shall be placed before the Grievance Redressal
Committee or such other Committee for redressal of the grievance in accordance with such
procedure as specified by SEBI from time to time;

Explanation(1):

For the purpose of this clause, the term “Constituent” shall mean Custodial Participant or a Trading
Member on whose instructions and/or on whose account the Clearing Member clears and settles
deals.

Explanation(2):

For the purpose of this clause, the term “Custodial Participant” shall mean a direct constituent/client
of a Clearing Member.

20
 CHAPTER X: ARBIT RATION

1. All claims, disputes, differences arising between Clearing Members and Constituents or
between Clearing Members inter se arising out of or related to deals admitted for clearing
and settlement by the Clearing Corporation or with reference to anything done in respect
thereto or in pursuance of such deals shall be referred to and decided by arbitration as
provided in the Rules, Byelaws and Regulations of the National Stock Exchange of India
Limited if the deal originated from it or in pursuance thereof.

2. All claims, disputes, differences arising between Clearing Members and Constituents or
between Clearing Members inter se arising out of or related to deals admitted for clearing
and settlement by the Clearing Corporation or with reference to anything done in respect
thereto or in pursuance of such deals shall be referred to and decided by Arbitration as
provided in the Rules, Byelaws and Regulations of the Clearing Corporation if the deal
originated from any Exchange other than the National Stock Exchange of India Limited
or in pursuance thereof. The provisions of these Byelaws providing for such Arbitration are as
hereunder:

(1) Definitions
(a) 'Arbitrator' shall mean a sole arbitrator or a panel of arbitrators.
(b) 'Act' shall mean the Arbitration and Conciliation Act, 1996 and includes any
statutor y modification, replacement or re-enactment thereof, for the time being in
force.

Referenceto Arbitration

(2) All claims, differences or disputes between the Clearing Members inter se and between
Clearing Mem bers and Constituents arising out of or in relation to dealings, contracts
and transactions admitted for clearing and settlement on the Clearing Corporation
subject to the Bye-Laws, Rules and Regulations of the Clearing Corporation or with
reference to an ything incidental thereto or in pursuance thereof or relating to their
validit y, construction, interpretation, fulfillment or the rights, obligations and liabilities of
the parties thereto shall be submitted to arbitration in accordance with the provisions of
these Byelaws and Regulations.

Provisions of these B yelaws and Regulations deem ed to form part of all dealings,
contracts and transactions

(3) In all dealings, contracts and transactions, which are admitted for clearing and
settlement on the Clearing Corporation subject to the Byelaws, Rules and Regulations
of the Clearing Corporation, the provisions relating to arbitration as provided in these
Byelaws and Regulations shall form and shall be deemed to form part of the dealings,
contracts and transactions and the parties shall be deemed to have entered into an
arbitration agreement in writing by which all claims, differences or disputes of the
nature referred to in B yelaw (2) above shall be submitted to arbitration as per the
provisions of these Byelaws and Regulations.

Lim itation period for reference of claim s, differences or disputes for arbitration
(4) All claims, differences or disputes referred to in Byelaw (2) above shall be submitted to
arbitration within six months from the date on which the claim, difference or dispute arose
or shall be deemed to have arisen. The time taken in conciliation proceedings, if any,
initiated and conducted as per the provisions of the Act and the time taken by the
Relevant Authority to administratively resolve the claim, differences or disputes shall be
excluded for the purpose of determining the period of six months.

21
Power of the Relevant Authority to prescribe Regulations

(5) (A) The Relevant Authorit y may, from time to time prescribe Regulations for the
following:

(i) The procedure to be followed by the parties in arbitral proceedings.

In particular, and without prejudice to the generality of the foregoing power,
such procedure m ay, inter alia, provide for the following:
(a) The forms to be used;
(b) the fees to be paid;
(c) The mode, manner and time period for submission of all pleadings by
both the parties;
(d) Matters relating to requests from the parties for amending or
supplementing thepleadings;and
(e) The consequences upon failure to submit such pleadings by the
parties.
(ii) The procedure to be followed by the arbitrator in conducting the arbitral
proceedings. In particular, and without prejudice to the generality of the
foregoing power, such procedure may, inter alia, provide for
(a) Adjournmentof hearings; and
(b) Terms and conditions subject to which the arbitrator may appoint experts
to report on specific issues and the procedure to be followed in arbitral
proceedings upon such an appointment.
(c) Passing interim orders/directions if deemed fit.
(iii) Different set of arbitration procedures for different claims,
differences or disputes after taking into consideration such circumstances
and facts as the Relevant Authority may deem fit, which circumstances
and facts may include the value of the subject matter and the persons
who are involved as parties to such claims, differences or disputes.

(iv) Creation of seats of arbitration for different regions or prescribing

geographical locations for conducting arbitrations and prescribing the courts
which shall have jurisdiction for the purpose of the Act.
(v) The claims, differences or disputes which may be referred to a sole
arbitrator and the claims, differences or disputes which may be referred
to a panel of arbitrators.
(vi) The procedure for selection of persons eligible to act as arbitrators.
(vii) The procedure for appointment of arbitrator.
(viii) The terms, conditions and qualifications subject to which any arbitrator may
be appointed.
(ix) Determination of the number of arbitrators in the case of a panel of
arbitrators.

(x) The time period within which a substitute arbitrator has to be appointed in
case the office of the arbitrator falls vacant for any reason whatsoever.
(xi) The matters to be disclosed by any person who is approached in connection
with his possible appointmentas an arbitrator.
(xii) The procedure to be adopted by the parties for challenging the
appointmentof an arbitrator.

22
 (xiii) (a) The claims, differences or disputes which, may be decided by the
arbitrator without a hearing unless either party in writing requests the
Relevant Authorit y for a hearing and the time period within which
such a request shall be made.
(b) The claims, differences or disputes which, may be decided by the
arbitrator only by hearing the parties unless both the parties jointly
waive the right to such hearing and the time period within which
such a waiver shall be made.
(xiv) The place of arbitration for each reference and the places where the arbitrator
can meet for consultation, for hearing witnesses, experts, or the parties, or for
inspection of documents, goods or other propert y.
(xv) The making of the arbitral award including the manner in which a decision
is to be taken in the case of panel of arbitrators and the form and contents of
the arbitralaward.
The term arbitral award shall also include an arbitral award on agreed terms.
Prescriptions as to the contents of the arbitral award may include provisions
for costs and where the arbitral award is for the paym ent of money, may
include interest pa yable on principal sum due.
(xvi) The amount of deposit or supplementar y deposit, as the case may be, as an
advance for the costs which it expects will be incurred in respect of the
claim, difference or dispute; provided where a counter- claim is submitted to
the arbitrator, a separate amount of deposit for the counter-claim may also
be specified.
(xvii) The administrative assistance which the Clearing Corporation may render
in order to facilitate the conduct of arbitral proceedings.
(xviii) All matters regarding the mode and the manner of service of notices and
communications by the parties including communication addressed to
arbitrator.
(xix) Any other matter which in the opinion of the Relevant Authority is required
to be dealt with in the Regulations to facilitate arbitration.

(5) (B) The Relevant Authority from time to time may amend, modif y, alter, repeal, or
add to the provisions of the Regulations.

Disclosure b y persons to be appointed as arbitrators

(6) Every person who is approached in connection with his possible appointment as an
arbitrator shall disclose to the Relevant Authority in writing any circumstances likely to
give rise to justifiable doubts as to his independence and impartiality. If the person
discloses any circumstances which in the opinion of the Relevant Authority are likely to
give rise to justifiable doubts as to his independence and impartiality, then he shall not be
appointed as an arbitrator.

Disclosure b y persons appointed as arbitrators

(7) An arbitrator, from the time of his appointment and throughout the arbitral
proceedings, shall, without delay, disclose to the Relevant Authority in writing any
circumstances referred to in Byelaw (6) above which have come to his knowledge
after his appointment as an arbitrator.

23
Termination of m andate of the arbitrator

(8) Themandate of the arbitrator shall terminate if

(a) The arbitrator withdraws from office for anyreason; or
(b) in the opinion of the Relevant Authority, the arbitrator becomes de jure or de facto
unable to perform his functions or for other reasons fails to act without undue
delay including failure to make the arbitral award within the time period specified
by the Relevant Authority. Such a decision of the Relevant Authority shall be final
and binding on the parties; or
(c) the mandate of the arbitrator is terminated by the Relevant Authorit y upon receipt
of written request for the termination of the mandate of the arbitrator from
both the parties to arbitration; or
(d) the arbitrator discloses any circumstances referred to in Byelaws (6) and (7)
which in the opinion of the Relevant Authority are likely to give rise to justifiable
doubts as to his independence and impartiality; or
(e) The arbitral proceedings are terminated as provided for herein.

Supplying of vacanc y to the office of the arbitrator

(9) At any time before the making of the arbitral award should the office of the arbitrator
fall vacant for any reason whatsoever including any vacanc y due to the illness or
death of the arbitrator or termination of the mandate of the arbitrator by the Relevant
Authority or otherwise, the vacanc y shall be supplied by the Relevant Authority by
following the same procedure as specified by it for appointment of the arbitrator.

Consideration of recorded proceedings and evidence

(10) Unless otherwise agreed by parties, any arbitrator who has been appointed by the
Relevant Authorit y to supply a vacanc y to the office of the arbitrator may repeat any
hearings previouslyheld.

Order or ruling of previous arbitrator not invalid

(11) An order or ruling of the arbitrator made prior to the termination of his mandate shall not
be invalid solely because his mandate has been terminated; provided that when the
termination has been effected pursuant to Byelaw (8)(d), the order or ruling of the
arbitrator made prior to termination of his mandate shall become invalid unless
otherwise agreed upon bythe parties.

Interim arbitral award and interim m easures ordered b y the arbitrator

(12) The arbitrator may be empowered to make an interim arbitral award as well as to
provide interim measures of protection. An arbitrator may require a party to provide
appropriate security in connection with an interim measure.

Appearance in arbitral proceedings b y counsel, attorney or advocate

(13) In arbitral proceedings where both the parties are Clearing Members, the parties shall not
be permitted to appear by counsel, attorney or advocate but where one of the parties is
a Constituent, and then the Constituent shall be permitted to appear by counsel,
attorne y or advocate. If the Constituent chooses to appear by counsel, attorney or
advocate, then the Clearing Member shall be granted a similar privilege.

Arbitral award b y arbitrator

(14) The arbitrator shall make the arbitral award within one month from the date of entering
upon the reference and the time to make the award may be extended from time to

24
 time by the Relevant Authority on an application by either of the parties or the arbitrator
as the case may be. For the purpose of this Byelaw the arbitrator shall be deemed to
have entered upon a reference on the date on which the arbitrator has or is deemed to
have applied his mind.

Arbitration proceedings subject to the provisions of the Act

(15) The arbitration proceedings as provided for by the provisions of these Byelaws and
Regulations shall be subject to the provisions of the Act to the extent not provided for
in these B yelaws or the Regulations.

Construction of references

(16) For the purposes of section 2(6) of the Act, in all claims, differences or disputes which
are required to be submitted to arbitration as per the provisions of these Byelaws and
the Regulations, wherever Part A of the Act leaves the parties free to determine a
certain issue, the parties shall be deemed to have authorised the Relevant Authority to
determine that issue.

Administrative assistance

(17) For the purpose of section 6 of the Act, in all claims, differences or disputes which
are required to be submitted to arbitration as per the provisions of these Byelaws and
Regulations, the parties shall be deemed to have arranged for administrative
assistance of the Relevant Authority in order to facilitate the conduct of the arbitral
proceedings.

Jurisdiction

(18) All parties to a reference to arbitration under these Byelaws and Regulations and the
persons, if any, claiming under them, shall be deemed to have submitted to the
exclusive jurisdiction of the courts in Mumbai or any other court as may be specified
by the Relevant Authority for the purpose of giving effect to the provisions of the Act.

3. All claims, disputes, differences, arising between the Securities Lending Members and their
Clients arising out of or related to transactions entered into under the Securities Lending for
Settlement Shortages scheme of the Clearing Corporation or with reference to anything done
in respect thereto or in pursuance of such transactions shall be referred to and decided in
accordance with the arbitration procedure as specified by the relevant authority from time to
time provided.

4. All claims, disputes or differences between the Participants and Clients arising out of
transactions entered into under the Securities Lending and Borrowing Scheme or with
reference to an ything done in respect thereto or in pursuance of such transactions shall be
referred to and decided by arbitration in accordance with the procedures as may be
specified bythe relevant authorityfrom time to time.

5. The provisions of Byelaws (1) & (2) shall become applicable to all claims, differences,
disputes between the parties mentioned therein for all dealings, contracts and transactions
admitted for clearing and settlement on the Clearing Corporation and made subject to the
byelaws, rules and regulations provided such dealings, contracts and transactions had been
entered into between the parties mentioned therein prior to or to the date on which the
Clearing Member was either declared a defaulter or expelled or has surrendered his trading
membership.

25
 CHAPTER XI: DEFAULT

1. DECLARATION OF DEFAULT

A clearing member may be declared a defaulter by direction/circular/notification of the

relevant authority of the segment if:
(1) he is unable to fulfill his clearing or settlement obligations; or
(2) he admits or discloses his inability to fulfill or discharge his duties, obligations and
liabilities; or
(3) he fails or is unable to pay within the specified time the damages and the money
difference due on a closing-out effected against him under the Rules, Bye Laws and
Regulations; or
(4) he fails to pay any sum due to the Clearing Corporation as the relevant authority
may from time to time prescribe; or
(5) he fails to pay or deliver all moneys, securities and other assets due to a clearing
member who has been declared a defaulter within such time of declaration of default of
such clearing member in such manner and to such person as the relevant authority may
direct; or
(6) he fails to abide by the arbitration award as laid down under the Rules, Bye Laws and
Regulations; or
(7) he admits or discloses his inability to fulfill or discharge his duties, obligations and
liabilities under the Securities Lending and Borrowing Scheme; or
(8) under any other circumstances as may be decided by the relevant authority from time to
time.

1A. If he, being an individual and/ or Partnership firm, has been adjudicated as an insolvent or
it, being a Company incorporated under the Companies Act, has been ordered to be
wound up by a court of law in the petition filed by any of his creditors, as the case
may be, he/ it shall ipso facto be declared a defaulter though he/ it may not have at the
same time defaulted on any of his/ its obligations on the Clearing Corporation.

1B. If he, being an individual and/or Partnership firm/ it, being a Company incorporated under
the Companies Act, files a petition before a Court of law for adjudication of himself as an
insolvent or for its winding up, as the case may be, he/ it shall ipso facto be declared a
defaulter though he/it may not have at the same time defaulted on any of his/ its obligations
on the Clearing Corporation.

1C. Without prejudice to the foregoing provisions contained in B yelaw (1) of this chapter,
where a clearing member, who is also a member/ trading member of any of the recognized
Stock Exchanges, is declared a defaulter by such Stock Exchange, the said Clearing
Member shall ipso facto stand declared a defaulter by the Relevant Authority.

1D. Notwithstanding anything contained in the B yelaws and Rules of Clearing Corporation, if
a clearing member is an Associate of a member/trading member declared a defaulter by
any recognized stock exchange, the said clearing member shall render itself liable to be
declared a defaulter bythe Relevant Authorit y.

Explanation:

The expression ‘Associate’ for the purpose of the above Byelaw shall have the meaning as
maybe defined by SEBI from time to time.

26
2. CLEARING MEMBER’S DUTY TO INFORM
A clearing member shall be bound to notify the Clearing Corporation immediately if there be a
failure byany clearing member to discharge his liabilities in full.

3. COMPROMISE FORBIDDEN
A clearing member shall not accept from any clearing member anything less than a full and
bona fide money payment in settlement of a debt arising out of a deal cleared through
the ClearingCorporation.

4. NOTICE OF DECLARATION OF DEFAULT

On a clearing member being declared a defaulter, a notice shall be forthwith issued to all
the clearing members of the Clearing Corporation.

5. NOTICE TO THE STOCK EXCHANGE

On a clearing member being declared a defaulter, a notice shall be forthwith issued to the
Exchange if the clearing member is also a trading member of that Exchange.

6. DEFAULTER’S BOOKS AND DOCUMENTS

W hen a clearing member has been declared a defaulter, the relevant authority shall take
charge of all his books of accounts, documents, papers and vouchers to ascertain the
state of his affairs and the defaulter shall hand over such books, documents, papers and
vouchers to the relevant authority.

7. LIST OF DEBTORS AND CREDITORS

The defaulter shall file with the relevant authority within such time of the declaration of
his default as the relevant authority may direct, a written statement containing the complete
list of his debtors and creditors and the sum owing by and to each.

8. DEFAULTER TO GIVE INFORMATION

The defaulter shall submit to the relevant authority such statement of accounts; information
and particulars of his affairs as the relevant authority may from time to time require and if so
desired shall appear before the relevant authority at its meetings held in connection with
his default.

9. INQUIRY
The relevant authority may conduct a strict inquiry into the accounts and dealings of the
defaulter in the market and shall report anything improper, unbusinesslike or unbecoming
a clearing member in connection therewith which may come to its knowledge.

10. DEFAULTER’S ASSETS

The relevant authority shall call in and realise the security deposits in any form, margin
money, other am ounts lying to the credit of and securities deposited by the defaulter and
recover all moneys, securities and other assets due, payable or deliverable to the defaulter
by any other Clearing Member in respect of any deal or dealing made subject to the Bye-
laws, Rules and Regulations of the Clearing Corporation and such assets shall vest ipso
facto, on declaration of any clearing member as a defaulter, in the Clearing Corporation for
the benefit of and on account of the Clearing Corporation, the relevant Specified
Exchange, Securities and Exchange Board of India, Constituents of the defaulter,
approved banks and any other persons as may be approved by the relevant authority and
other recognised stock exchanges / clearing corporations.

27
11. PAYMENT TO RELEVANT AUTHORITY
(1) All monies, securities and other assets due, payable or deliverable to the defaulter
must be paid or delivered to the relevant authority within such time of the declaration of
default as the relevant authority may direct. A clearing member violating this provision
maybe declared a defaulter.
(2) A clearing member who shall have received a difference on account or shall have
received any consideration in any deal prior to the date fixed for settling such account
or deal shall, in the event of the clearing member from whom he received such
difference or consideration being declared a defaulter, refund the same to the relevant
authority for the benefit and on account of the creditor members. Any clearing
member who shall have paid or given such difference or consideration to any other
clearing member prior to such settlement day shall again pa y or give the same to the
relevant authority for the benefit and on account of the creditor member in the
event of the default of such other member.

(3) A clearing member who receives from another clearing member during any clearing a
claim note or credit note representing a sum other than difference due to him or due
to his constituent which amount is to be received by him on behalf and for the
account of that constituent shall refund such sum if such other clearing member be
declared a defaulter within such number of days as specified by the relevant authority
after the settling da y. Such refunds shall be made to the relevant authority for the
benefit and on account of the creditor members and it shall be applied in liquidation
of the claims of such creditor members whose claims are admitted in accordance
with the Rules, Bye Laws and Regulations.

12. DISTRIBUTION

The relevant authority shall at the risk and cost of the creditor members pay all assets
received in the course of realisation into such bank and/or keep them with the Clearing
Corporation in such names as the relevant authority may from time to time direct and shall
distribute the same in accordance with the Rules, Bye Laws and Regulations.

13. CLOSING-OUT

(1) Clearing members having open deals with the defaulter shall close out such deals after
declaration of default. Such closing out shall be in such manner as may be specified by
the relevant authority from time to time. Subject to the regulations in this regard specified
by the relevant authority, when in the opinion of the relevant authority, circumstances so
warrant, such closing out shall be deemed to have taken place in such manner as may be
determined by the relevant authority.

(2) Differences arising from the above adjustments of closing out shall be claimed from the
defaulter or paid to the relevant authority for the benefit of creditor clearing members
of the defaulter.

14. CLAIMS AGAINST DEFAULTER

Within such time of the declaration of default as the relevant authority may direct every
clearing member carrying on business on the Clearing Corporation shall, as it may be
required to do, either compare with the relevant authority his accounts with the defaulter
duly adjusted and made up as provided in the Rules, Bye-Laws and Regulations or
furnish a statement of such accounts with the defaulter in such form or forms as the relevant
authority may prescribe or render a certificate that he has no such account.

28
15. DELAY IN COMPARISON OR SUBMISSION OF ACCOUNTS
Any clearing member failing to compare his accounts or send a statement or certificate
relating to a defaulter within the time specified shall be called upon to compare his
accounts or send such statement or certificate within such further time as maybe specified.

16. PENALTY FOR FAILURE TO COMPARE OR SUBMIT ACCOUNTS

The relevant authority may take such action as it may deem fit including levying of fine and
suspension on any clearing member who fails to compare his accounts or submit a
statement of its account with the defaulter or a certificate that he has no such account
within the specified time.

17. MISLEADINGSTATEMENT

The relevant authority may take such action as it may deem fit including levying of fine and
suspension, if it is satisfied that any comparison statement or certificate relating to a
defaulter sent bysuch clearing member was false or misleading.

18. ACCOUNTS OF RELEVANT AUTHORITY

The relevant authorit y shall keep a separate account in respect of all monies,
securities and other assets payable to a defaulter which are received by it and shall defray
therefrom all costs, charges and expenses incurred in or about the collection of such assets
or in or about any proceedings it takes in connection with the default.

19. APPLICATION OF ASSETS

The relevant authority shall apply the net assets remaining in its hands after defraying
all such costs, charges and expenses as are allowed under the Rules, Byelaws and
Regulations to be incurred by the Clearing Corporation, in satisfying the claims in the
order of priority provided hereunder;

(a) Dues to the Clearing Corporation, the relevant Specified Exchange, Securities and
Exchange Board of India.
The payment of such subscriptions, debts, fines, fees, charges and other m oneys due to
Clearing Corporation, the relevant Specified Exchange and Securities and Exchange
Board of India on a prorata basis.

(b) Dues to Constituents of the defaulter

The payments as may be admitted by the relevant authority, as being due to Constituents of
the defaulter for debts, liabilities, obligations and claims arising out of any contracts made by
the defaulter subject to the Rules, Bye-laws and Regulations of the Clearing Corporation,
provided that if the amount is insufficient then the amounts shall be distributed prorata
amongst all the constituents of the defaulter.

(c) Dues to the Approved Banks and claims of any other persons as approved by the
Relevant Authority

After making pa yments under (b) above, the amounts remaining, if an y, shall be utilised
to meet the claims of the approved banks and of any other person as may be admitted by
the Relevant Authority. The claims of the approved banks should have arisen by virtue of
Clearing Corporation or the relevant Specified Exchange invoking any bank guarantee
issued by the bank concerned to the Clearing Corporation or the relevant Specified
Exchange as the case may be on behalf of the defaulter to fulfill his obligation of
submitting bank guarantee, guaranteeing discharge of obligations under the Byelaws,
Rules and Regulations of Clearing Corporation/the relevant Specified Exchange. The claims
of other persons should have arisen out of or incidental to the clearing and settlement of a
29
 deal on the Clearing Corporation or requirements laid down by the Clearing Corporation,
provided that if the amount available be insufficient to pay all such claims in full, they shall
be paid pro rata.

(d) Dues to any other recognised stock exchange/clearing Corporation:

After meeting the claims under (c) above, the remaining amounts, if any, shall be disbursed
to any other recognised stock exchange / clearing corporation for the purpose of meeting
the obligations of the defaulter as a member of that exchange/clearing corporation. If the
defaulter is a member of more than one recognised stock exchange/clearing corporation,
then the remaining amounts shall be distributed amongst all such recognized stock
exchanges / clearing corporations and if the remaining amount is insufficient to meet the
claims of all such stock exchanges/clearing corporations, then the remaining amount shall
be distributed pro rata among all such stock exchanges / clearing corporations.

(e) Surplus

The surplus amounts, if any, remaining after meeting all the above claims, shall be paid to
the Clearing Member and in case where the Clearing Member has expired, the surplus
amount shall be paid to his legal heirs / legal representatives.

20. CERTAIN CLAIMS NOT TO BE ENTERTAINED

The relevant authority shall not entertain anyclaim against a defaulter –
(1) which arises out of a contract in securities, dealings in which are not permitted or which
are not made subject to Bye Laws, Rules and Regulations of the Clearing Corporation
or in which the claimant has either not paid himself or colluded with the defaulter in
evasion of margin payable on bargains in an y security;

(2) which arises out of a contract in respect of which comparison of accounts has not
been made in the manner specified in the Rules, Bye Laws and Regulations or when
there has been no comparison if a contract note in respect of such deals has not been
rendered as provided in the Rules, Bye Laws and Regulations;
(3) which arises from any arrangement for settlement of claims in lieu of bonafide money
paym ent in full on the day when such claims become due;
(4) which is in respect of a loan with or without security;
(5) which is not filed with the relevant authority within such time of date of declaration of
default as maybe specified by the relevant authorit y.

21. ASSIGNMENT OF CLAIMS ON DEFAULTER’S ESTATE

A Clearing member being a creditor of a defaulter shall not sell, assign or pledge the claim on
the estate of such defaulter without the consent of the relevant authorit y.

22. PROCEEDINGS IN THE NAME OF OR AGAINST THE DEFAULTER

The Relevant Authority shall be empowered to (a) initiate any proceedings in a court of law
either in the name of the Clearing Corporation or in the name of the defaulter against any
person for the purpose of recovering any amounts due to the defaulter (b) initiate any
proceedings in a court of law either in the name of Clearing Corporation or in the name of
the creditors (who have become creditors of the defaulter as a result of deals cleared and
settled subject to Byelaws, Rules and Regulations of the Clearing Corporation) of the defaulter
against the defaulter for the purpose of recovering any amounts due from the defaulter. The
defaulter as well as the creditors of the defaulter shall be deemed to have appointed the
Clearing Corporation as their constituted attorney for the purpose of taking such proceedings.

30
23. PAYMENT OF RELEVANT AUTHORITY
If any clearing member takes any proceedings in a court of law against a defaulter whether
during the period of its default or subsequent to its re-admission to enforce any claim
against the defaulter's estate arising out of any admitted deals in the market made
subject to the Bye Laws, Rules and Regulations of the Clearing Corporation before it was
declared a defaulter and obtains a decree and recovers any sum of money thereon, it
shall pay such amount or any portion thereof as may be fixed by the relevant authority for
the benefit and on account of the creditor members having claims against such defaulter.

31
 CHAPTER XII: CORE SETTLEMENT GUARANTEE FUND
1. Objective of the Core Settlement Guarantee Fund (CSGF)

The Clearing Corporation shall have a fund called Core Settlement Guarantee Fund (CSGF) for
each clearing segment with respect to each segment of the Specified Stock Exchange to
guarantee the settlement of trades executed in the respective segment of the Specified Stock
Exchange. In the event a Clearing Member fails to fulfill the settlement obligations, the CSGF
shall be used to fulfill the settlement obligations of the Clearing Member and complete the
settlement without affecting the normal settlement process.

2. Corpus of the CSGF

(1) The corpus of the CSGF shall be adequate to meet out all the contingencies arising on
account of failure of any Clearing Member(s).

(2) The quantum of the corpus of the CSGF shall be determined by taking into consideration the
risk or liability to the CSGF on account of various factors including trade volume, delivery
percentage, maximum settlement liability of the Clearing Members, the history of defaults of the
Clearing Members, capital adequacy of the Clearing Members and the degree of safety
measures employed by the Clearing Corporation. In order to assess the fair quantum of the
corpus of the CSGF, the Clearing Corporation shall consider the following factors:

a) Risk management system in force

b) Current and projected volume/turnover to be cleared and settled by the Clearing Corporation
on guaranteed basis
c) Track record of defaults of the Clearing Members (number of defaults and amount in default
of the Clearing Members)

3. Minimum Required Corpus of the CSGF

The Relevant Authority shall specify from time to time the Minimum Required Corpus (MRC) of
the CSGF for each clearing segment of the Clearing Corporation with respect to each segment of
the Specified Stock Exchange in accordance with the norms prescribed by SEBI from time to
time.

4. Constitution of the Corpus of CSGF

The corpus of CSGF shall consist of the following:

a) Contributions of various contributors:

The contributions of various contributors to the CSGF at any point of time shall be as follows:

i. Clearing Corporation’s contribution: The Clearing Corporation’s contribution to CSGF shall

be at least 50% of the MRC. The Clearing Corporation shall make this contribution from its
own funds. The Clearing Corporation’s contribution to CSGF shall be considered as part of
its net worth.

ii. Specified Stock Exchange’s contribution: The Specified Stock Exchange’s contribution to
CSGF shall be at least 25% of the MRC. Such contribution can be adjusted against the
transfer of profit by the Specified Stock Exchange as per Regulation 33 of Securities
Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012
(SECC Regulations).

iii. Clearing Member’s primary contribution: The Clearing Corporation may seek risk based
contribution from Clearing Members of the clearing segment to the CSGF subject to the
following conditions:

32
  The total contribution from the Clearing Members shall not be more than 25% of the
MRC. Such contribution shall ordinarily be in the form of cash contribution to CSGF.
However, the Clearing Corporation may accept the Clearing Member’s contribution in the
form of bank fixed deposits, Central Government Securities or any other form in
accordance with the norms prescribed by SEBI from time to time.

 No exposure shall be available on CSGF contribution of any Clearing Member. For this
purpose, the exposure-free collateral of the Clearing Member available with the Clearing
Corporation can be considered towards CSGF contribution of the Clearing Member.
 The required contribution of each Clearing Member shall be pro-rata based on the risk
that they bring to the system.

 The Clearing Corporation shall have the flexibility to collect the Clearing Member’s
primary contribution either upfront or staggered over a period of time. In case of
staggered contribution, the remaining balance shall be met by the Clearing Corporation to
ensure adequacy of total CSGF corpus at all times. Such Clearing Corporation
contribution shall be available to the Clearing Corporation for withdrawal as and when
further contributions from the Clearing Members are received.
b) Any penalties levied by the Clearing Corporation (as per Regulation 34 of SECC
Regulations.)

c) Interest on cash contribution to CSGF shall accrue to the CSGF and pro-rata attributed to
the contributors in proportion to their cash contribution.
5. Management of CSGF
(1) The Relevant Committee of the Clearing Corporation shall manage the CSGF.

(2) The Clearing Corporation shall follow prudential norms of investment policy for the CSGF
corpus and establish and implement policies and procedures to ensure that the CSGF corpus is
invested in accordance with the investment norms prescribed by SEBI from time to time.
6. Access to CSGF

The Clearing Corporation may utilise the CSGF in the event of a failure of the Clearing Members
to fulfill their settlement obligations.

7. Further contribution to / Recoupment of CSGF

(1) The requisite contributions to the CSGF by various contributors for any month shall be made
by the contributors before start of the month.
(2) The Clearing Corporation shall review and determine by 15th of every month the adequacy
of contributions made by various contributors as above and call for any further contributions to
the CSGF as may be required to be made by various contributors for the next month.
(3) In the event of usage of Core SGF during a calendar month, contributors shall, as per usage
of their individual contribution, immediately replenish the Core SGF to MRC. However, such
contribution towards replenishment of Core SGF by the members would be restricted to only once
during a period of 30 calendar days regardless of the number of defaults during the period. The
period of 30 calendar days shall commence from the date of notice of default by Clearing
Corporation to market participants.
(4) In case there is failure on part of some contributor(s) to replenish its (their) contribution, the
same shall be immediately met, on a temporary basis during the month, in the following order:

a) By Clearing Corporation
b) By Specified Stock Exchange

33
8. Default waterfall
The Default waterfall shall become applicable only in case the Clearing Member is declared a
defaulter after appropriation of the monies of the defaulting Clearing Member.
The default waterfall of the Clearing Corporation for any clearing segment shall follow the
following order –
a) Monies of the defaulting Clearing Member (including the defaulting Clearing Member's
primary contribution to the CSGF(s) and excess monies of the defaulting Clearing Member in
other clearing segments.)
b) Insurance, if any.
c) Clearing Corporation resources (equal to 5% of the clearing segment MRC).
d) CSGF of the clearing segment in the following order:

i. Penalties
ii. Clearing Corporation’s contribution to the extent of at least 25% of the clearing segment
MRC
iii. Remaining CSGF: Clearing Corporation’s contribution, Specified Stock Exchange’s
contribution and non-defaulting Clearing Members’ primary contribution to CSGF on pro-rata
basis.
e) Proportion of remaining Clearing Corporation resources (excluding Clearing Corporation
contribution to core SGFs of other segments and higher of INR 100 Crore or the capital
requirement towards orderly winding down of critical operations and services) equal to ratio
clearing segment MRC to sum of MRCs of all clearing segments.*
f) Clearing Corporation/Specified Stock Exchange contribution to CSGF of other clearing
segments (after meeting obligations of those clearing segments) and remaining Clearing
Corporation resources to that extent as approved by SEBI.
g) Capped additional contribution by non-defaulting Clearing Members of the clearing
segment.**
h) Any remaining loss to be covered by way of pro-rata haircut to pay-outs. ***
Explanation
1. * higher of INR 100 Crore or capital requirement towards orderly winding down of critical
operations and services to be excluded only when remaining Clearing Corporation
resources are more than INR 100 Crore.
2. **(i) Clearing Corporation shall call for the capped additional contribution only once
during a period of 30 calendar days regardless of the number of defaults during the period. The
period of 30 calendar days shall commence from the date of notice of default by Clearing
Corporation to market participants.
(ii) Clearing Corporation shall have relevant regulations/provisions for non - defaulting
members to resign un-conditionally within the abovementioned period of 30 calendar days, subject
to member closing out/settling any outstanding positions, paying the capped additional contribution
and any outstanding dues to SEBI. No further contribution shall be called from such resigned
members.
(iii) The maximum capped additional contribution by non - defaulting members shall be lower
of 2 times of their primary contribution to Core SGF or 10% of the Core SGF of the segment on the
date of default in case of equity / debt segments.
(iv) The maximum capped additional contribution by non - defaulting members shall be lower of 2
times of their primary contribution to Core SGF or 20% of the Core SGF of the segment on the
date of default in case of derivatives segment.
(v) In case of shortfall in recovery of assessed amounts from non –defaulting members, further
loss can be allocated to layer 'f' with approval of SEBI.

3. ***In case loss allocation is effected through haircut to payouts, any subsequent usage of
funds shall be with prior SEBI approval. Further, any exit by Clearing Corporation post using this
layer shall be as per the terms decided by SEBI in public interest.

34
9. Stress Testing and Back Testing

The Clearing Corporation shall conduct stress tests for credit risk, liquidity stress test, reverse
stress test, back testing for adequacy of margins and such other tests as may be appropriate in
accordance with the norms prescribed by SEBI from time to time.

35
 CH APTER XIII: M ISCELLANEOUS

1. Save as otherwise specifically provided in the Bye Laws and Regulations specified by the
relevant authority regarding clearing and settlement arrangement, in promoting, facilitating,
assisting, regulating, managing and operating the Clearing Corporation, the Clearing
Corporation should not be deemed to have incurred any liabilit y, and accordingly no claim
or recourse in respect of or in relation to any dealing in securities or any matter connected
therewith shall lie against the Clearing Corporation or any authorised person(s) acting for the
Clearing Corporation.

2. No claim, suit, prosecution or other legal proceeding shall lie against the Clearing Corporation
or any authorised person(s) acting for the Clearing Corporation in respect of anything which
is in good faith done or intended to be done in pursuance of any order or other binding
directive issued to the Clearing Corporation under any law or delegated legislation for the
time being in force.

3. The provisions of Byelaws, Rules, Regulations and Circulars issued thereunder by the
Clearing Corporation shall be applied to the extent applicable or as may be specified by
the Clearing Corporation from time to time for all transactions under the Securities Lending
and Borrowing Scheme.

36
 CHAPTER XIV : INDIVIDUALLY SEGREGATED COLLATERAL
FACILITY – TRI-PARTY REPO

1) Definitions applicable to this Chapter

a) “Collateral” means such deposits whether in cash or non-cash as specified by the relevant authority
from time to time which may be deposited with the Clearing Corporation for meeting margin or
settlement obligations or any other obligations or dues as specified by the relevant authority.

b) “Facility” shall mean the Individually Segregated Collateral Facility provided by the Clearing
Corporation for facilitating the deposit of Collaterals by Constituents for deals in the Tri-Party Repo
Market of Debt segment.

c) Constituent” shall mean such constituent as defined under clause 9 of Chapter 1 who registers with the
Clearing Member to avail the Facility subject to such eligibility criteria as may be specified by the
relevant authority from time to time.

2) Individually Segregated Collateral Facility

a) The Clearing Corporation provides the Facility for the purpose of facilitating the deposit of Collaterals
by Constituents with the Clearing Corporation either directly or through the Clearing Member for the
deals made by them subject to Rules,Byelaws and Regulations of the Clearing Corporation as specified
by the Clearing Corporation from time to time.

b) Notwithstanding anything contained in any other Byelaw in these Byelaws, the relevant authority may
facilitate the deposit of Collateral by Constituents of Clearing Member under the Facility subject to the
Byelaws in this Chapter and such other terms and conditions as prescribed from time to time by the
Clearing Corporation.

c) Under the Facility, Collateral may be deposited by the Constituent with the Clearing Corporation either
directly or through its Clearing Member as specified by the Clearing Corporation from time to time.
The Clearing Member shall provide the details of the Constituent providing such Collateral to the
Clearing Corporation.

d) The relevant authority may permit withdrawal of such Collateral by the Constituent either directly or
through the Clearing Member as specified by the Clearing Corporation from time to time, subject to the
fulfilment of all outstanding obligations by the Constituent and such other terms and conditions as may
be prescribed by the relevant authority.

e) The Clearing Corporation shall consider the Collateral deposited towards the margin or settlement
obligations or any other obligations or dues of the constituent arising out of the deals entered into by
such Constituent and shall not consider the Collateral towards any obligation of the Clearing Member
other than that of the Constituent.

37
 f) The settlement of deals of Constituents availing the Facility shall be carried out separately from the
settlement of other deals of the Clearing Member in accordance with the procedures as prescribed by
the relevant authority from time to time.

g) In the event of a default by the Clearing Member of a Constituent, the Collateral deposited by the
Constituent may be dealt with in any one or more ways as below:

i) The relevant authority may determine if the Constituent has fulfilled margin or settlement
obligations or any other obligations or dues arising out of the dealsmade subject to the Rules,
Byelaws and Regulations of the Clearing Corporation and accordingly utilize the Collateral
towards meeting such outstanding obligations.

ii) The relevant authority may transfer the Collateral deposited by the Constituent to a non-defaulting
Clearing Member in accordance with the procedure prescribed by the relevant authority from time
to time.

h) The Clearing Corporation may provide information to the Constituent with respect to the Collateral
deposited along with obligations or such other information as prescribed by the Clearing Corporation
from time to time.

3) Lien

The Collateral provided by the Constituents from time to time, whether in the form of cash, bank guarantee,
securities or otherwise, with the Clearing Corporation, shall be subject to a first and paramount lien for any
sum due to the Clearing Corporation by such Constituent and all other claims against such Constituent by the
Clearing Member for due fulfilment of engagements, obligations and liabilities of such Constituent arising out
of or incidental to any dealings made subject to the Byelaws, Rules and Regulations of the Clearing
Corporation. The Clearing Corporation shall be entitled to adjust or appropriate such Collateral for such dues
and claims, to the exclusion of the other claims against the Constituent, without any reference to such
Constituent or the Clearing Member of the Constituent.
4) Collateral Utilization for Shortage

Without prejudice to the liability of the Clearing Member for due fulfillment of any deal under these byelaws
and regulations, in the event of failure of the Constituent to pay-in funds on a settlement leg, the Clearing
Corporation may at its sole discretion reset the limit for the Constituent to zero so as to reject any further
order placed by the Constituent. The Clearing Corporation may at its discretion liquidate the collateral of the
concerned Constituent and if the liquidated value of the collateral is insufficient to cover the shortfall value
then the Clearing Member of the concerned Constituent shall be liable for fulfillment of the difference
between the liquidation value and shortfall value along with other applicable charges, if any.

38
5) Settlement Finality

When a settlement has become final and irrevocable, the right of the Clearing Corporation to appropriate any
Collaterals contributed by the Constituent towards its settlement or other obligations in accordance with these
Byelaws shall take priority over any other liability of or claim against the said Constituent.

6) Right of Clearing Corporation

The right of Clearing Corporation to recover the dues from the Constituent, arising from the discharge of
its Clearing and settlement functions, from the Collaterals of the Constituents, shall have priority over any
other liability of or claim against the Constituents

7) Privity of Contract

Notwithstanding anything contained in these Byelaws in general, and in particular with respect to privity
of contract under Byelaw 11 of Chapter VI or parties to a deal under Byelaw 3 of Chapter VII, in order to
facilitate the deposit of Collateral by a Constituent with the Clearing Corporation under the Facility, the
Constituent may be permitted to deposit the Collateral with the Clearing Corporation either directly or
through the Clearing Member of the Constituent.

8) Close Out

A deal admitted for Clearing and settlement may be closed out by the Clearing Corporation on failure of a
Constituent to comply with any of the provisions relating to delivery, payment and settlement of deals or on
any failure to fulfil the terms and conditions subject to which the deal has been made, or such other
circumstances as the relevant authority may specify from time to time. The deal may be closed out by the
Clearing Corporation in such manner, within such time frame and subject to such conditions and procedures
as the relevant authority may prescribe from time to time.
9) Clearing Member Only Parties to Deals

Without prejudice to the provisions of Chapter VII in general and Byelaws 3 and 5 of Chapter VII in
particular, even though the Clearing Corporation does not recognize as parties to deals any persons other
than its own Clearing Members, for the limited purpose of Individually Segregated Collateral Facility, the
Clearing Corporation shall recognize the Collateral placed by the Constituent towards the obligation of the
Constituent.

10) Clearing Member Only Liable For Margins

a) Without prejudice to the provisions of Chapter VIII, even though only Clearing Members are
responsible for complying with the provisions related to margins under the said chapter, for the limited
purpose of Individually Segregated Collateral Facility, the Clearing Corporation shall recognize the
Collateral placed by the Constituent towards the margin obligation of the Constituent as sufficient
compliance by the Clearing Member of its margin obligations under the said chapter with respect to such
Constituent. However in case of failure by such Constituent, to meet its margin requirements, the
Clearing Member shall continue to be responsible for meeting the margin requirements of such

39
 Constituents.

b) The Clearing Corporation shall from time to time specify margin requirements for the Constituents
including initial margin on open positions through risk based algorithms. The Constituents shall furnish
and maintain such margins with the Clearing Corporation either directly or through the Clearing Member
in such form and within such time as specified by the Clearing Corporation. Every Constituent has a
continuing obligation to maintain margins at the level and for the period stipulated by the Clearing
Corporation from time to time. The Clearing Corporation shall segregate in such manner as it may deem
fit the margins deposited by the Clearing Member on its own account and on behalf of Constituents.

11) Pay-in and Pay-out of Funds

The Clearing Corporation shall clear deals under the facility on a netted basis at the Constituent level. At
the Clearing Member level, the deals would be grossed based on individual netted positions of all
Constituents of the Clearing Member. The Clearing Member may have both pay-in and pay-out of funds
settlement obligation on a settlement date. The pay-in/pay-out would be paid to/ received from the Clearing
Member, in accordance with the laid down settlement procedures by the Clearing Corporation in this
regard. The Clearing Corporation may also facilitate direct transfer of funds for the Constituents based
on the instruction received from Clearing Member.

The Clearing Corporation would carry out funds settlement as per the existing procedures either at the
designated clearing banks or at RBI.

12) Obligations of Clearing Member

The above provisions are only to facilitate the deposit of Collateral by the Constituent under the Facility
and are without prejudice to and do not in any way affect the obligations of the Clearing Member under
these Byelaws and Regulations in any manner whatsoever.

40
 CHAPTER XV: WINDING DOWN OF CLEARING CORPORATION

1) Winding Down

The Clearing Corporation may wind down its critical operations and services voluntarily or involuntarily as per the policy
approved by the Relevant Authority in accordance with norms or directions issued by SEBI from time to time.

2) Voluntary Winding Down

The Clearing Corporation may voluntarily choose to wind down and exit as a strategic or business decision event when it is
solvent and able to meet all its obligations to both Clearing Members as well as other creditors subject to such norms laid
down under the policy approved by the Relevant Authority in accordance with norms or directions issued by SEBI from
time to time.

3) Involuntary Winding Down

The Clearing Corporation may wind down its critical operations and services on involuntary basis due to various factors
including but not limited to the following:

i. if default management resources maintained by the Clearing Corporation are exhausted due to default by the
Clearing Member(s), and consequently if the Clearing Corporation fails to fulfil its obligations towards Clearing Members
and/or its Constituents.
ii. if its solvency gets adversely affected as a result of, including but not limited to large operational expenses, legal
expenses, business or investment losses rendering the Clearing Corporation unable to fulfil its obligations to Clearing
Member(s), its constituents and/or other creditors.
iii. if SEBI or any other statutory authority under Applicable Laws issues directions to the Clearing Corporation to
wind down the critical operations and services.

4) Winding Down Procedure

The winding down procedure shall be as prescribed by the Relevant Authority in accordance with the norms or directions
issued by SEBI from time to time and shall be binding on the Clearing Members.”

41