Description

NSE consolidated circular governing the Non-Neat Frontend (NNF) facility, covering registration processes, auditor selection norms, and undertaking requirements for trading members accessing NSE's trading system through in-house, vendor, or ASP-developed front-ends.

Summary

NSE has issued a consolidated circular governing the Non-Neat Frontend (NNF) Facility, which enables trading members to access NSE’s trading system through front-end interfaces developed in-house, procured from an empanelled vendor, or obtained through an Application Service Provider (ASP). The circular consolidates registration requirements, auditor selection norms for mandatory system audits, and the undertaking format members must execute before availing the NNF facility.

Key Points

  • NNF facility allows trading members to use alternative front-end interfaces to access NSE’s trading system in lieu of NEAT (NSE’s proprietary front-end)
  • Members must execute a formal undertaking (Annexure I) on non-judicial stamp paper of Rs. 1,000 or state-prevailing value, whichever is higher
  • The undertaking applies to members using NNF developed in-house, procured from an empanelled vendor, or accessed via an ASP
  • System audits are mandatory and must be conducted by qualified, independent IT auditors meeting specified selection norms
  • Auditors must have a minimum of 3 years of IT audit experience with securities market participants
  • Auditor resources must hold recognized certifications: D.I.S.A. (ICAI), CISA (ISACA), CISM (ISACA), or CISSP (ISC²)
  • Auditors must have experience with IT audit/governance frameworks such as CobiT
  • Auditors must be free from conflicts of interest and must not be related (directly or indirectly) to the stock broker, its directors, or promoters
  • Auditors must have no pending cases related to previously audited companies under SEBI’s jurisdiction that would indicate incompetence or unsuitability

Regulatory Changes

This is a consolidated circular, meaning it brings together previously issued guidelines on the NNF facility into a single reference document. No new regulatory requirements are introduced; the circular restates and formalizes existing norms for auditor eligibility, independence, and the undertaking format for NNF registration.

Compliance Requirements

  • Trading Members: Must submit a duly stamped undertaking (Annexure I) as part of the NNF registration process, regardless of whether the front-end is developed in-house, from a vendor, or via ASP
  • Auditor Empanelment: Members must engage IT auditors who satisfy all five auditor selection norms (experience, certifications, framework knowledge, independence, and clean regulatory record)
  • System Audit Coverage: Audits must cover all major areas specified under the Terms of Reference (ToR) mandated by SEBI/stock exchange
  • Documentation: The undertaking must be executed on non-judicial stamp paper or franked paper, specifying date and place of execution

Important Dates

  • No specific new deadlines introduced; requirements apply on an ongoing basis as part of NNF registration and periodic system audit cycles
  • Stamp duty for undertaking: Rs. 1,000 or state-prevailing value at the time of execution

Impact Assessment

This circular primarily impacts trading members currently using or intending to use non-standard front-end interfaces to access NSE’s trading system. Compliance burden is moderate — members must ensure their chosen IT auditors meet all five selection criteria, which may limit the auditor pool. The consolidated format reduces ambiguity by providing a single authoritative reference. No direct market-wide trading or pricing impact is anticipated. ASP-dependent members should verify their service providers’ audit compliance status.

Impact Justification

Operational compliance circular affecting trading members using NNF facility; consolidates existing rules for system audit and registration but introduces no new market-wide regulatory changes or immediate trading impact.