Client Code Modification and Error Code Policy

Client Code Modification and Error Code Policy

Objective: The objective of SPREAD X Securities Pvt.Ltd. is to frame standard policy for handling the mistakes on part of the Dealers while executing trades and rectification thereupon.
Stock Exchanges provide a facility to modify client code after the trade has been executed to rectify any error or wrong data entry at the time of punching orders. However, such Client Code Modification is subject to certain guidelines issued by SEBI and the Stock Exchanges in this regard.
“Error Trades” means the trades which will be modified / to be modified / allowed, to be modified subject to guidelines of the SEBI / Stock Exchange(s) and this policy. The Exchange(s) has provided the facility of client code modification only with a view to rectify genuine errors.
The facility is mainly to provide a system for modification of client codes in case of genuine errors in punching / placing the orders. It is to be used as an exception and not a routine. To prevent misuse of the facility Stock Exchange(s) levy penalty / fine for all non-institutional client code modifications.
This policy is applicable to all Client Code Modifications carried out / to be carried out in any of the client accounts, subject to guidelines issued by the SEBI / Stock Exchanges from time to time, in any segment of any exchange of which the company is a Member.
Details about Genuine Error:
The following trades shall be modify / allowed to be modify, shall be treated as genuine error and transferred to “ERROR – SPREAD X SECURITIES PRIVATE LIMITED – ERROR ACCOUNT”.
  • Punching error / typing error of client codes due to any genuine error or mistake in order entry, while punching the order, by any of dealer.
  • Trade entered for wrong client due to any miscommunication from the client /authorized representative of the client.
  • Selecting wrong scrip while placing order.
  • Placing the order for a wrong quantity.
  • Placing buy order instead of sale and vice versa.
  • Institutional trades modified to broker error / pro account.
Such Modification shall not allow under any circumstances:
  • If a wrong trade has been done intentionally.
  • If the wrong trade is not reported within the time line.
  • Surveillance / RMS / Compliance department has not recognised mistake.
  • Trade not executed with responsibility.
  • Without Cancel Limit order Executed.
  • Repetitive mistakes.
  • Technical glitches
Timeline of Reporting:
It is necessary to give information with evidence Client Code Modification requests through “ERROR ACCOUNT” will be accepted only before the close of Trading Session of that day.(i.e., Equity segment 15.30 P.M. & Currency segment 5:00 P.M).
Regulatory Requirements:

The regulator and the exchanges view these dealing errors very seriously and have now imposed severe penalties in case such errors occur. In this regards the SEBI and Exchanges have issued the following circulars:

  • SEBI/HO/CDMRD/DMP/CIR/P/2016/73 August 19, 2016
  • SEBI/HO/CDMRD/ DMP/CIR/P/2016/43 March 29, 2016
  • NSE/INVG/2011/18484 dated. July 29, 2011
  • BSE/20110729-24 dated. Friday, July 29, 2011
  • SEBI/CIR/DNPD/01/2011 Dated. Jan 03.2011
  • SEBI/CIR/DNPD/6/2011 Dated. July 05, 2011
  • NSE/INVG/2011/17029 Dated. February 17, 2011
  • NSE/INVG/2011/18716 Dated: Aug 26. 2011
  • NSCCL/SEC/2004/0464 Dated. May 31, 2004
As per the above circulars, the broker has to transfer the trades from the client’s code to a specifically designated code viz. “Error Account”.
For Institutional Clients:
Members are required to enter a custodial participant code (CP code) at the time of order entry in the NEAT system. The CP code can either be INST or a valid CP code. On any particular trading day, members can modify the CP code at the order level during market hours and post market hours up to 4.15 p.m. This can be done through the NSCCL Clearing Management System (NCMS) by uploading a CP code modification file as per the prescribed format or through the NCMS screen itself. In case of file upload, the return file is generated in the members’ NCMS local database and it contains the success or rejects status of the records along with the rejection code.

Shifting of any trade (institutional or non – institutional) to the error account of the Broker shall not be treated as modification of client code under SEBI circular dated July 5, 2011, provided the positions arising out of trades in error account are subsequently liquidated / closed out in the market and not shifted to some other client code. With a view to minimize errors committed by the Dealers for each client code change, Management asks Dealers to write reasons for the same in Client code Error Sheet. Unless Management satisfied with the reason, no client code change to ERROR account is allowed. Daily monitoring of such client code changes are done by Management and Dealers are instructed to remain careful while executing the Trades. Dealers are required to take adequate precautions while placing the orders. All Staff members are advised to take note of the same and ensure necessary compliance.

Penalty
The penalty or fine, if any, levied on CBSPL for any wrong trade occurred due to any miscommunication from then client / authorized representative of the client shall be borne by the client.
Internal Control
No client code modification shall be accepted without first informing the Management or the Business Head, Senior Sales Traders, Compliance Officer and Head of Back office.
Surveillance

A record for client code modification cases will be maintained on every financial year basis.

Review of the policy:
The policy will be reviewed, in accordance with the circulars that the regulatory authorities may issue from time to time, and changes will be incorporated in consultation with the Board Members / Compliance officer and concerned Head of Department.
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