SEBI prescribes `common pool' mechanism for automatic arbitration at stock exchanges
18 March 2013
The Securities and Exchange Board of India (SEBI) has directed stock exchanges to form a panel of arbitrators from across all stock exchanges having nation-wide trading terminals by pooling them and making them publicly available, including by way of display on web sites of the stock exchanges.
The market regulator has advised stock exchanges to create a 'Common Pool' of arbitrators consisting of arbitrators listed on the panels of all stock exchanges having nation-wide trading terminals.
The pooling will be done centre-wise, so that an applicant from the region, say Delhi, will be able to choose any arbitrator from the 'Common Pool' for Delhi, SEBI said.
If the client and member (stock broker, trading member or clearing member) fail to choose the arbitrator from the common pool, the arbitrator will be chosen by an 'automatic process' wherein neither the parties to arbitration (ie, client or member) nor the concerned stock exchanges will be directly involved.
Under the 'automatic process' the arbitrator will be selected at random by a computer generated selection process from the list of arbitrators in the 'common pool'. The selection process will be in chronological order of the receipt of arbitration reference, ie, only after selecting an arbitrator for the former arbitration reference received, selection for the latter will be taken up.
The 'automatic process' will send a system generated, real time alert (SMS, email etc) to all entities involved in the particular case. Further, the communication for the appointment of the arbitrator will be sent immediately and in any case not later than the next working day from the day of picking of the arbitrator. This communication will be sent by the stock exchange on which the dispute had taken place, to all concerned entities, including clients, arbitrators, members, stock exchanges etc.
All future selection of arbitrators by stock exchanges will be through the 'automatic process', SEBI said.
In case of any conflict of interest in an arbitration reference being assigned to any arbitrator the arbitrator will have to upfront decline the arbitration reference.
After the arbitrator declines, the 'automatic process' will pick the name of another arbitrator. This will continue till the time there is no conflict of interest by the selected arbitrator.
In such cases the time for selection may be extended up to a maximum of 30 days. However, SEs should put on record the reasons of such extension.
In case of conflict of interest by the arbitrator, the information for the same may reach the stock exchange on which the dispute has taken place within 15 days of receipt of communication from the SE. The said information may be sent by any method, which ensures proof of delivery.
Fees of arbitrator should be dealt in line with existing provisions by the stock exchange on which the dispute had taken place.