Description

NSE modifies enforcement circular by retrospectively deleting provisions related to penalties for non-maintenance of pre-order confirmation evidence for client trades.

Summary

NSE has issued a modification to its earlier enforcement circular dated July 5, 2024 (NSE/INSP/62813). The Exchange has retrospectively deleted provisions that treated non-maintenance of pre-order confirmation evidence as unauthorized trades subject to stringent penalties. This modification specifically removes Schedule I (B) Sr. No. 63 relating to pre-order confirmation requirements.

Key Points

  • Retrospective deletion of Schedule I (B) Sr. No. 63 from circular NSE/INSP/62813 dated July 5, 2024
  • Previous provision treated non-maintenance of pre-order placement evidence as unauthorized trades
  • Earlier framework mandated penalties applicable to unauthorized trades for this non-compliance
  • SEBI Circular SEBI/HO/MIRSD/DOP1/CIR/P/2018/54 dated March 22, 2018 still requires trading members to maintain pre-order placement evidence
  • All other provisions of the original July 5, 2024 circular remain unchanged
  • Modification applies retrospectively to all applicable cases

Regulatory Changes

The Exchange has removed the specific penalty framework that equated failure to maintain or provide pre-order placement evidence with unauthorized trading. Previously, under the deleted provision:

  • Non-maintenance or non-provision of pre-order placement evidence was construed as unauthorized trades executed without client consent
  • Such violations attracted the penalty structure outlined in circular NSE/ISC/60035 dated December 29, 2023 for unauthorized trades

The underlying SEBI requirement (SEBI/HO/MIRSD/DOP1/CIR/P/2018/54 dated March 22, 2018) for maintaining pre-order placement evidence remains in force, but the specific penalty linkage to unauthorized trade penalties has been removed.

Compliance Requirements

  • Trading members must continue to maintain evidence of pre-order placement for client trades as per SEBI requirements
  • Trading members should note the retrospective nature of this deletion for any pending enforcement actions
  • Members should review any ongoing matters related to pre-order confirmation compliance
  • Contact regional offices or central help desk for clarifications on specific cases

Important Dates

  • Circular Date: October 8, 2025
  • Reference Circular Date: July 5, 2024 (NSE/INSP/62813)
  • Effective Date: Retrospective application to all cases under the deleted provision
  • Underlying SEBI Circular: March 22, 2018 (SEBI/HO/MIRSD/DOP1/CIR/P/2018/54)

Impact Assessment

Regulatory Impact: This modification represents a significant easing of enforcement severity for trading members. The retrospective deletion suggests a policy recalibration on how pre-order confirmation violations are treated.

Operational Impact: Trading members facing enforcement actions under the deleted provision may see relief from unauthorized trade penalties. However, the core compliance obligation to maintain pre-order evidence remains unchanged.

Market Impact: This change may reduce compliance burden and penalty exposure for trading members while maintaining the documentation requirements essential for investor protection. The retrospective nature indicates potential relief for members with pending cases.

Compliance Burden: While documentation requirements persist, the removal of the most severe penalty framework (equating to unauthorized trades) reduces the compliance risk profile for this specific violation category.

Impact Justification

Retrospective deletion of penalty provisions significantly impacts enforcement actions against trading members for pre-order confirmation non-compliance, reducing severity of consequences for this specific violation.