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TMI BlogOutsourcing of activities by Stock Exchanges and Clearing CorporationsX X X X Extracts X X X X X X X X Extracts X X X X ..... 9, 2015, guidelines were also laid down for governing the outsourcing of activities by the Depositories. 2. It is also observed that the stock exchanges and clearing corporations avail the services of third party service providers / outsourced agencies to perform certain processes, services or activities. 3. In this regard stock exchanges and clearing corporations are advised to formulate and document an outsourcing policy duly approved by their Board based on the guidelines placed at Annexure I. 4. Stock Exchanges and clearing corporations are also directed to take necessary steps to put in place systems for implementation of the circular, including necessary amendments to the relevant bye-laws, rules, etc., if any, within six months fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered with SEBI (for eg. custodians, depositories, etc.) shall not be covered under these guidelines. 3.3. The core and Critical activities of the stock exchanges shall include but may not be limited to the following: (a) Provision and daily operation of trading facilities; (b) Management of the market functioning, including market surveillance and monitoring like online surveillance, investigation, inspection, price band relaxation, etc.; (c) Enforcement of exchange rules/self-regulation; (d) Trading information disclosure excluding data feed distribution to third party vendors; (e) Core IT support infrastructure / activities for running the core activities of exchanges; (f) Admission of trading member to exchange; (g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... experts in their field (eg. IT services / Network services / IT Security etc.). However, in all such cases, the responsibility and control shall wholly vests with the exchanges and clearing corporations. Further, in case the Trading and / or Clearing software is purchased from a vendor, then there must be an arrangement to keep the source code in escrow, such that in case of any issue with the vendor, the software can be taken out of escrow and used to continue the business. 4. Selection of Service Providers / Outsourced agencies and Due Diligence 4.1. The service provider / Outsourcing agency shall be subjected to appropriate due diligence to assess its capability to employ a high standard of care in performing the service and comply w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsent of the exchange and clearing corporation and with appropriate safeguards including proper legal documentation/ agreement. 6.2. Stock exchange and clearing corporations shall also consider the ability of the sub-contractor to perform the services as a part of the due diligence process. 7. Contract with Service Provider / Outsourcing agency 7.1. Contractual terms and conditions governing relationships, functions, obligations and responsibilities of the contracting parties, potential conflict of interests should be carefully and properly defined in written agreements. 7.2. Every outsourcing agreement should address the risks and risk mitigation strategies identified at the risk evaluation and due diligence stages. Each agreement s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke appropriate measures to determine that its service providers / Outsourcing agencies establish and maintain emergency procedures and a plan for business continuity / disaster recovery, with periodic testing of backup facilities. 10. Security and Confidentiality of Information 10.1. Stock exchanges and clearing corporations should have adequate procedures in place that require the service provider / Outsourcing agency to protect exchange's proprietary, member-related and potentially market sensitive information and software from unauthorized usage. 11. Termination Procedures 11.1. Stock exchanges and clearing corporations should include contractual provisions relating to the termination of the contract and appropriate exit strategies ..... X X X X Extracts X X X X X X X X Extracts X X X X
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