Order under Section 4B (6) read with Section 4B (7) of the Securities Contracts (Regulation) Act, 1956 in the matter of the Inter-Connected Stock Exchange of India Limited (Corporatisation and Demutualisation) Scheme, 2005. - S.O. No.1320(E) - SEBI/MRD/49408/2005 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 15th September, 2005 SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI S. O. 1320 (E). 1.0 The Inter-connected Stock Exchange of India Limited (hereinafter referred to as the ISE ), registered under the Companies Act, 1956 as a company limited by guarantee, is a recognised stock exchange having its principal place of business at International Infotech Park, Tower 7, 5th Floor, Vashi, Navi Mumbai 400 703. It is required to be corporatised and demutualised in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956 (hereinafter referred to as the SCRA ). 2.0 The ISE, vide its letter dated January 31, 2005, submitted a Scheme for its corporatisation and demutualisation for approval to the Securities and Exchange Board of India (hereinafter referred to as the SEBI ) in terms of sub-section (1) of section 4B of the SCRA. SEBI, vide letter dated May 25, 2005, advised ISE to submit a revised Scheme, after taking into account the provisions of the BSE (Corporatisation and Demutualisation) Scheme, 2005 that may be relevant and applicable to ISE. 3.0 Thereafter, ISE, vide its letter dated June 11, 2005, submitted a revised Scheme for its corporatisation and demutualisation after taking into account the provisions of the BSE Scheme. SEBI made enquiries and obtained further information from ISE through discussions with it. The Scheme was discussed in a meeting with the Officials of ISE on June 23, 2005. Based on the discussions during the said meeting, ISE desired to resubmit the Scheme. 4.0 Accordingly, ISE, vide its letter dated July 11, 2005 submitted a further revised scheme (hereinafter referred to as the Scheme ) for its corporatisation and demutualisation to SEBI for approval in accordance with the provisions of the SCRA. 5.0 The Scheme, inter alia, provides for the re-registration of ISE as a company limited by shares, segregation of ownership and management from the trading rights of the members, restriction on voting rights of the shareholders who are also Trading Members, composition of the Governing Board, etc. in accordance with the provisions of section 4B(6) of the SCRA, utilisation of assets and reserves and other matters required for the purpose of and in connection with the corporatisation and demutualisation of ISE. 6.0 SEBI, having considered the Scheme and on being satisfied that it would be in the interest of the trade and also in the public interest, hereby approves the Scheme with minor modifications. The approved Scheme is enclosed as Annexure - A. 7.0 ISE shall ensure compliance with the Scheme within the time as specified in the Scheme and shall not do anything contrary to the provisions of Scheme and submit compliance report to SEBI in the manner as may be specified by SEBI. 8.0 SEBI reserves the right to amend, alter or modify the Scheme in the interest of the trade and the public interest and in furtherance of the objectives of the corporatisation and demutualisation of the stock exchange. 9.0 The Scheme shall come into effect on the day of its publication in the Official Gazette. [F. No. SEBI/MRD/49408/2005] M. DAMODARAN, Chairman Encl: Annexure - A Annexure A THE INTER-CONNECTED STOCK EXCHANGE OF INDIA LIMITED (CORPORATISATION AND DEMUTUALISATION) SCHEME, 2005 1. Title and Commencement 1.1 This Scheme shall be called the Inter-connected Stock Exchange of India Limited (Corporatisation Demutualisation) Scheme, 2005 (hereinafter referred to as this Scheme ). 1.2 This Scheme shall have effect on its publication under sub-section (4) of section 4B of the Securities Contracts (Regulation) Act, 1956 (herein after referred to as the SCRA ). 1.3 Inter-connected Stock Exchange of India Limited (herein after referred to as the ISE ) shall be corporatised and demutualised in accordance with this Scheme on and from the Appointed Date as may be notified by the Securities and Exchange Board of India (herein after referred to as the SEBI ) in respect of ISE under section 4A of the SCRA: Provided that the activities specified in the respective clauses of this Scheme shall be implemented as per the time schedule specified in these clauses. 2. Definitions In this Scheme, unless the context otherwise requires: 2.1 Due Date means the date, as may be determined by the Governing Board, which shall not be later than 3 months from the date of publication of the Order under sub-section (7) of section 4B of the SCRA. 2.2 Governing Board means the Board of Directors of ISE. 2.3 Inter-connected Stock Exchange of India Limited (ISE) means the company limited by guarantee incorporated under section 12 of the Companies Act, 1956, having its principal place of business at International Infotech Park, Tower 7, 5th Floor, Vashi, Navi Mumbai 400 703 and recognised as a Stock Exchange under the SCRA, and which shall be re-registered as a company limited by shares, in pursuance of clause 3 of this Scheme. 2.4 Shareholder means a person who holds any equity share(s) of ISE. 2.5 Trading Member means a stock broker of any segment of ISE and registered with SEBI as such under the SEBI (Stock Brokers Sub-brokers) Regulations, 1992. 2.6 Words and expressions used and not defined in the Scheme but defined in the Securities and Exchange Board of India Act, 1992, the Depositories Act, 1996, the SCRA, the Companies Act, 1956, the rules and regulations under these Acts, memorandum and articles of association, the rules, bye-laws and regulations of ISE shall have the same meanings respectively assigned to them in the above mentioned Acts, memorandum and articles of association, rules, bye-laws and regulations. 3. Re-registration 3.1 ISE shall re-register itself, prior to Due Date, as a company limited by shares under section 12 of the Companies Act, 1956, in the name and style of Inter-connected Stock Exchange of India Limited , in accordance with section 32 of the Companies Act, 1956. 3.2 The following participating stock exchanges, shall each subscribe to and pay for fully paid-up equity shares of ISE of the face value of Re.1/- each for cash at par, for the purpose of its re-registration, in the manner specified as under: Participating Stock Exchange No. of shares Amount Bangalore Stock Exchange Ltd. 70,000 Rs.70,000/- Cochin Stock Exchange Ltd. 70,000 Rs.70,000/- Coimbatore Stock Exchange Ltd. 70,000 Rs.70,000/- Gauhati Stock Exchange Ltd. 70,000 Rs.70,000/- Jaipur Stock Exchange Ltd. 40,000 Rs.40,000/- Madras Stock Exchange Ltd. 30,000 Rs.30,000/- Magadh Stock Exchange Association 70,000 Rs.70,000/- Mangalore Stock Exchange 70,000 Rs.70,000/- Saurashtra Kutch Stock Exchange Ltd. 70,000 Rs.70,000/- Uttar Pradesh Stock Exchange Association Ltd. 70,000 Rs.70,000/- Total 6,30,000 Rs.6,30,000/- 4. Allotment of Shares 4.1 Every participating stock exchange (other than those mentioned in clause 3.2), shall be entitled to 70,000 fully paid-up equity shares of the face value of Re.1/- each for cash at par of ISE. 4.2 ISE shall allot the equity shares to the entitled participating stock exchanges, as referred to in clause 4.1, by the Due Date. 4.3 The invitation to subscribe to, and the offer, issue and allotment of equity shares of ISE pursuant to this clause shall not be considered as being an invitation, offer, issue or allotment to the public. 5. Governing Board 5.1 The first Governing Board on re-registration shall comprise of Directors as are named as first directors in the Articles of Association of ISE, subject to the condition that the representatives of a trader or dealer does not exceed one-fourth of the total strength of the Governing Board. 5.2 The Governing Board, on and from the Due Date, shall be constituted in accordance with the provisions of the articles of association of ISE in force from time to time: Provided that (i) the representation of stock brokers, trading members or clearing members of any stock exchange or clearing corporation does not exceed one-fourth of the total strength of the Governing Board, and the remaining directors are appointed in the manner as may be specified by SEBI from time to time, and (ii) the Chief Executive, by whatever name called, is an ex-officio director. 5.3 Notwithstanding anything contained in clause 5.2, SEBI may nominate directors on the Governing Board as and when deemed fit. 6. Listing of Shares ISE may at any time list its securities on any recognised stock exchange. 7. Demutualisation 7.1 A Trading Member may or may not be a shareholder. 7.2 A shareholder may or may not be a Trading Member. 8. Trading Rights 8.1 A Trader or Dealer, who is registered as a stock broker on the day preceding the Due Date, shall become a Trading Member of the Cash Segment of ISE on the Due Date. 8.2 A Trader or Dealer, who is not registered as a stock broker on the day preceding the Due Date, shall become a Trading Member of the Cash Segment of ISE on and from the date he is registered as a stock broker under the SEBI (Stock Brokers and Sub-brokers) Regulations, 1992: Provided that his application for registration is submitted to SEBI within one month of the Due Date. 8.3 After the Due Date, a person desirous of becoming a Trading Member shall be admitted, if he complies with the requirements and pays the fees and deposits as specified in the rules, bye-laws and regulations of ISE. 8.4 ISE shall, for the purpose of admitting any person as a Trading Member, follow uniform standards in terms of capital adequacy, deposits, fees, etc., irrespective of the mode of acquisition of the trading right by that person: Provided that different standards may be followed for admission of a person as a Trading Member who has acquired the trading right by way of transmission; Provided further that different standards may be followed for admission of Trading Members in different segments. 8.5 A Trading Member may surrender his trading membership of any segment to ISE in the manner specified in the rules, bye-laws and regulations of ISE. 8.6 Irrespective of the date or mode of acquisition of the trading right, the Trading Members in any segment of ISE shall have uniform rights and privileges: Provided that ISE may, with the prior approval of SEBI, grant additional privileges to those persons who were Traders or Dealers on the day preceding the Due Date. 8.7 Trading Members on the Due Date shall continue to have the same rights and privileges in respect of their clients and constituents and other Trading Members arising out of or under any act, omission or contract or law, notification, order, direction, etc., as had accrued to them while being Traders or Dealers on or before the Due Date. 8.8 Trading Members shall be bound by all the obligations and liabilities towards their clients and constituents, SEBI, ISE, ISE Securities Services Ltd. and other authorities or other persons arising out of or under any act, omission or contract or law, notification, order, direction, etc., while being Traders or Dealers on or before the Due Date. 9. Shareholding Rights 9.1 ISE shall ensure that atleast 51% of the equity shares are held by public, other than shareholders having trading rights and the Participating Stock Exchanges, in the manner and within the period prescribed in sub-section (8) of section 4B of the SCRA. 9.2 On and from the Appointed Date, ISE shall ensure that public, other than shareholders having trading rights and the Participating Stock Exchanges, continuously hold atleast 51% of the equity shares. 9.3 On and from the Due Date, no shareholder, who is a Trading Member, shall have voting rights (taken together with the voting rights held by him and by persons acting in concert with him) exceeding 5% of the voting rights in ISE. 10. Memorandum and Articles of Association, etc. 10.1 The memorandum and articles of association, rules, bye-laws and regulations of ISE on the day preceding the Due Date shall, unless contrary to or inconsistent with or excluded by this Scheme, apply to it on and from the Due Date. 10.2 ISE shall incorporate the provisions of this Scheme appropriately in its memorandum and articles of association, rules, bye-laws and regulations, on or before the Due Date. 10.3 The memorandum and articles of association, rules, bye-laws and regulations may be amended after the Due Date in accordance with the applicable laws, provided that no such amendment is inconsistent with any provision of this Scheme. 11. Utilisation of Assets and Reserves 11.1 ISE shall not do anything contrary to the provisions of section 4B (3) of the SCRA. 11.2 Without prejudice to the generality of the provisions in clause 11.1, ISE shall not use its assets and reserves, as on the date of publication of this scheme or the proceeds from disposal of such assets or the proceeds from disposal of successive species of assets acquired from the proceeds of disposal of such assets for any purpose other than discharging the current liabilities outstanding as on the date of publication of this Scheme or the business operations of stock exchange. 11.3 The Settlement Guarantee Fund, the Investor Protection Fund and the Investor Services Fund of ISE shall, after corporatisation and demutualisation, continue to exist in the same form and be utilised by it only for the purpose they have been set up for. 12. Transfer of Clearing and Settlement Functions 12.1 ISE shall, within two years of the Due Date, subject to prior approval of SEBI, transfer the duties and functions of the clearing house of ISE to a clearing corporation recognised under SCRA. 12.2 Until the duties and functions of the clearing house are transferred as provided in clause 12.1, the clearing and settlement functions in relation to trading on ISE shall be carried out by the clearing and settlement mechanism as used by ISE at present or in such other manner as the Governing Board may determine. 13. Compliance with this Scheme 13.1 ISE shall ensure compliance with the provisions of this Scheme at all times and shall not do anything contrary to the provisions of this Scheme. 13.2 Without prejudice to the generality of the provisions of clause 13.1, ISE shall continuously comply with the provisions in clauses 5.2, 7, 8.3, 8.4, 8.5, 8.6, 9.2, 9.3, 10.3 and 11 of this Scheme. 13.3 ISE shall report compliance with the provisions of this Scheme in such manner as may be required by SEBI from time to time. 14. Removal of Difficulties If any difficulty arises in giving effect to the provisions of this Scheme, SEBI may, at the written request of ISE, relax any of the provisions of this Scheme. ******