FUTURES MARKET ACT, 2016

An Act to provide for the regulation of futures market

[Gazette of Pakistan, Extraordinary, Part-I, 14^th April, 2016]

ACT NO. XIV OF 2016

No. F. 22(6)/2016-Legis., dated 13.4.2016.–The following Act of Majlis-e-Shoora (Parliament) received the assent of the President on the 9th April, 2016 and is hereby published for general information:–

WHEREAS it is expedient to enact a Law to provide for the regulation of futures market and matters connected therewith and incidenatal thereto;

It is hereby enacted as follows:–

PART I
PRELIMINARY

1. Short title, commencement and extent.–(1) This Act may be called the Futures Market Act, 2016.

(2) It shall come into force on such date as the Federal Government may appoint by notification in the official Gazette and different dates may be appointed for coming into force of different provisions thereof.

(3) It shall extend to the whole of Pakistan.

2. Definition.–In this Act, unless there is anything repugnant in the subject or context,–

(1) “accredited” means as accredited in accordance with Section 50;

(2) “associate” in relation to–

(a) an individual, means–

(i) that individual’s spouse, son, adopted son, step-son, daughter, adopted daughter, step-daughter, father, step-father, mother, step-mother, brother, step-brother, sister or step-sister;

(ii) any company of which that individual is a director;

(iii) any company in which that individual, or any of the persons mentioned in Paragraph (i), has control of twenty per cent or more of the voting power in that company, whether such control is exercised individually or jointly; and

(iv) any employee of that individual; or

(b) a company, means another company in which the first mentioned company has control of not less than twenty per cent of the voting power in that company, and a reference in this Act to an associated person or associated company shall be construed accordingly;

(3) “auditor” shall have the same meaning as assigned to the word under the Chartered Accountants Ordinance, 1961 (X of 1961), to be appointed from the panel of auditors approved by the Commission to perform the functions assigned to auditors under this Act;

(4) “bank” means a bank licensed under Section 27 of the Banking Companies Ordinance, 1962 (LVII of 1962);

(5) “clearing facility” means a facility for the clearing and settlement of futures contracts traded on a futures exchange;

(6) “clearing house” means a company that is licensed by the Commission as a clearing house under Section 24;

(7) “clearing member” means a person who, is admitted as clearing member for clearing and settlement on his own behalf as well as on behalf of others under the regulations of a clearing house;

(8) “Commission” shall have the same meaning as assigned to it under the Securities and Exchange Commission of Pakistan Act, 1997 (XLII of 1997);

(9) “Commissioner” shall have the same meaning as assigned to it under the Securities and Exchange Commission of Pakistan Act, 1997(XLII of 1997);

(10) “commodity” in relation to a futures contract, means–

(a) agricultural, livestock, fishery, forestry, mining or energy goods and any product that is manufactured or processed from any such goods; and

(b) any other goods or products which as such may be notified by the Commission in the official Gazette;

(11) “company” shall have the same meaning as assigned to it under the Companies Ordinance, 1984 (XLVII of 1984);

Explanation.–The expression “company” used in this Act, shall, wherever the context requires, also include a body corporate or corporation established by any special enactment for the time being in force;

(12) “control” includes the right to appoint majority of directors or to control management or policy decisions, exercisable by a person individually or through any person acting in concert, directly or indirectly, whether by virtue of his shareholding, management right, shareholders agreement, voting agreement or otherwise;

(13) “Court” means company Bench of High Court concerned as provided in Sections 7 and 8 of the Companies Ordinance, 1984 (XLVII of 1984);

(14) “customer” means a person on whose behalf a regulated person carries on any regulated activity and includes any person commonly known as an investor;

(15) “customer assets” means money received, receivable or retained by, or any other property deposited with, a regulated person in the course of his business for which he is liable to account to his customer, and any money or other property accruing therefrom;

(16) “customer money” means money of any currency that, in the course of carrying on his regulated activity, a regulated person holds or receives on behalf of a customer, or which he owes to a customer;

(17) “default proceedings” means proceedings or other action taken by a clearing house or futures exchange under its default regulations;

(18) “default regulations” means those regulations which provide for the initiation of proceedings or other action if a clearing member has failed, or appears to be unable, or likely to become unable, to meet his obligations for all unsettled or open market contracts to which he is a party;

(19) “director” in relation to a company, includes any person occupying in relation to the position of a director by whatever name called;

(20) “derivative contract” means any of the following,–

(a) forward contract;

(b) an option contract;

(d) any other class of contract as prescribed by the Commission;

(21) “family” means a spouse and lineal ascendants and descendants;

(22) “financial instrument” includes any currency, currency index, interest rate, interest rate instrument, interest rate index, commodity index bond index and such other financial instruments as may be notified by the Commission in the official Gazette;

(23) “futures adviser” means a person, who–

(a) gives investment advice on whether, which, the time at which or the terms or conditions of which, futures contracts are to be entered into; or

(b) issues analysis or reports, for the purposes of facilitating the recipients of the analysis or reports to make decisions on whether, which, the time at which, or the terms or conditions on which, futures contracts are to be entered into,

but does not include–

(A) a person who gives such advice or issues such analysis or reports, including–

(i) in a newspaper, magazine, book or other publication which is made generally available to the public, and which does not have as its principal or only object the provision of advice or the issue of analysis or reports, concerning securities; or

(ii) in television broadcast or radio broadcast for reception by the public, whether on subscription or otherwise; and

(B) any other person excluded to such extent as may be notified by the Commission;

(24) “futures broker” means a person who, by way of business, whether as principal or agent,–

(a) makes or offers to make with any person, or induces or attempts to induce any person to enter into or to offer to enter into any agreement for or with a view to purchase or sale of a futures contract; or

(b) solicits or accepts any order for, or otherwise dealing in,, or effects transactions in a futures contract for its customer or on its own account;

(25) “futures contract” means–

(i) an arrangement where one party agrees to enter into a contract to deliver a specified quantity of a specified commodity or securities or financial instruments, to another party at a specified future time and at a specified price payable at that time; or

(ii) where the parties agree to discharge their obligations under the contract by settling the difference between the value of a specified quantity of a specified commodity or securities or financial instruments agreed at the time of the making of the contract and at a specified future time; or

(iii) such other futures contract or class of futures contracts or derivative contracts as prescribed by the Commission, and includes options on contracts of the kind described in paragraph (i), (ii) or (iii);

(26) “futures exchange” means a public company that is licensed by the Commission as a futures exchange under Section 5;

(27) “futures market” means any market, or place at which, or any service or facility, whether electronic or otherwise, by means of which, offers, promises or invitations to sell, purchase or exchange futures contracts are regularly made on a centralised basis, being offers or invitations that are intended or may reasonably be expected, to result, directly or indirectly, in the acceptance or making, respectively, of offers to sell, purchase or exchange futures contracts;

(28) “holding company” shall have the same meaning as assigned to them in Section 3 of the Companies Ordinance, 1984 (XLVII of 1984);

(29) “licensed person” means any person or entity licensed under this Act and includes a regulated person;

(30) “majority shareholder” means shareholder who holds, owns or control, directly or indirectly, more than fifty per cent of the shares having voting rights in a company or who, for other reasons, has domination or control of the company and includes group of shareholders who collectively own more than fifty per cent of shares or otherwise have that domination or control;

(31) “margin” means the amount of cash, approved securities or any other form of margin as prescribed;

(32) “market contract” means–

(a) a contract subject to the regulations of a clearing house entered into by the clearing house with a clearing member under a novation and for the purpose of the clearing and settlement of transactions using the clearing facility whether before or after default proceedings have commenced; or

(b) a transaction which is being cleared or settled using the clearing facility and subject to the regulations of a clearing house, whether or not a novation referred to in sub-clause (a) has taken place;

(33) “money” includes any form of money, whether represented by a cheque or other payable order, or otherwise;

(34) “prescribed” means prescribed by regulations made by the Commission;

(35) “principal” in relation to a representative, means the regulated person which the representative represents;

(36) “private company” shall have the same meaning as assigned to them in clause (28) of sub-section (1) of Section 2 of the Companies Ordinance, 1984 (XLVII of 1984);

(37) “public company” shall have the same meaning as assigned to them in clause (30) of sub-section (1) of Section 2 of the Companies Ordinance, 1984 (XLVII of 1984);

(38) “quotation and trade reporting system” means the operation of facilities that permit the dissemination of price quotations for the purchase and sale of futures contracts and reports of completed transactions in futures contracts but does not include a futures exchange or a futures broker;

(39) “record” means all documentary, electronic and digital materials created, generated, sent, communicated, received, or stored, regardless of physical form or characteristics;

(40) “regulated activity” means any activity, required to be licensed, under Section 46;

(41) “regulated person” means a person or entity licensed by the Commission under Part IV of this Act to carry on any regulated activity;

(42) “regulations” means the regulations made by the Commission under this Act;

(43) “representative” means an individual, by whatever name called, in the employment of or acting for or by arrangement with, a regulated person, who carries out for that regulated person any such activity (other than work ordinarily performed by accountants, clerks or cashiers), whether or not he is remunerated, and whether his remuneration, if any, is by way of salary, wages, commission or otherwise; and includes any officer of a company who performs for the company any such activity whether or not he is remunerated, and whether his remuneration, if any, is by way of salary, wages, commission or otherwise and includes an agent of a regulated person;

(44) “rules” means rules made under this Act;

(45) “securities” for the purposes of this Act, means–

(a) in the case of listed instruments, includes shares and stock of a company (shares);

(b) any instrument creating or acknowledging indebtedness which is issued or proposed to be issued by a company including, in particular, debentures, debenture stock, loan stock, bonds, notes, commercial paper, sukuk or any other debt securities of a company, whether constituting a charge on the assets of the company or not (debt securities);

(c) loan stock, bonds, sukuk and other instruments creating or acknowledging indebtedness by or on behalf of a government, central bank or public authority (Government and public debt securities);

(d) modaraba certificates, participation term certificates and term finance certificates;

(e) any right (whether conferred by warrant or otherwise) to subscribe for shares or debt securities (warrants);

(f) units in a collective investment scheme, including units in or securities of a trust fund (whether open-ended or closed end);

(g) share or stock index;

(h) any other instrument notified by the Commission to be securities for the purposes of this Act, but does not include–

(A) futures contracts;

(B) bills of exchange;

(D) certificates of deposit;

(46) “securities broker” means a broker licensed by the Commission;

(47) “senior management officers” includes, chief executive officer/managing director, deputy managing director/chief operating officer and chief regulatory officer or holder of such positions by whatever name called and any other officer holding such position as prescribed by the Commission;

(48) “securities exchange” means a company licensed by the Commission as a securities exchange;

(49) “subsidiary” shall have the same meaning as assigned to it in the Companies Ordinance, 1984 (XLVII of 1984);

(50) “substantial shareholder”, in relation to a company, means a person who has an interest in shares in the company–

(a) the nominal value of which is equal to or more than ten per cent of the issued share capital of the company; or

(b) which enables the person to exercise or control the exercise of ten per cent or more of the voting power at a general meeting of the company;

(51) “trading in futures contracts” means, whether as principal or agent,–

(a) making or offering to make with any person, or inducing or attempting to induce any person to enter into or to offer to enter into any agreement for or with a view to purchase or sale of a futures contract; or

(b) soliciting or accepting any order for, or otherwise dealing in a futures contract for its customer or on its own account;

(52) “trading right entitlement certificate” or “TRE certificate” means a trading right entitlement certificate issued by the futures exchange in accordance with its regulations; and

(53) “trading right entitlement certificate holder” or “TRE certificate holder” means a company to which a trading right entitlement certificate has been issued.

PART II
FUTURES EXCHANGES

3. Licensing requirement.–(1) No person shall establish or operate or assist in establishing or operating or hold himself out as operating a futures market except under and in accordance with a futures exchange licence granted by the Commission under Section 5.

(2) The Commission shall determine the number and places for the establishment of futures exchanges.

4. Eligibility for licensing.–(1) Subject to sub-section (2), a public company having an object to operate as a futures exchange shall be eligible for licensing as a futures exchange only, if–

(a) it has, and maintains at all times, a minimum paid-up capital (net of losses) of five hundred million rupees or such higher amount as may be notified by the Commission:

Provided that a commodity exchange registered as under Securities and Exchange Ordinance, 1969 (XLII of 1969), before the commencement of this Act, shall be required to comply with this requirement within such period as may be notified by the Commission:

Provided further that if the public company referred to in sub-section (1) is a securities exchange the requirement referred to in clause (a) shall be in addition to any other minimum paid up capital required for a securities exchange.

(b) not more than such percentage of shares of the company as may be notified by the Commission is held directly or indirectly by–

(i) a securities broker or any connected person or the majority shareholder of such securities broker, or an associate of the majority shareholder of such securities broker;

(ii) securities exchange or any connected person or the majority shareholder of such securities exchange, or an associate of the majority shareholder of such securities exchange;

(iii) a futures broker or any connected person or the majority shareholder of such futures broker, or an associate of the majority shareholder of such futures broker; or

(iv) a futures exchange and or any connected person or the majority shareholder of such futures exchange, or an associate of the majority shareholder of such futures exchange:

Provided that the Commission may notify, in the official Gazette, any class or classes of persons to hold such number of shares of the futures exchange as the Commission deems appropriate;

(c) its promoters, directors, majority shareholders and senior management officers fulfil the fit and proper criteria as may be prescribed; and

(d) it satisfies such other conditions as may be prescribed by the Commission.

(2) For the purposes of clause (b) of sub-section (1), two or more companies are connected companies if one of them is–

(a) the holding company of the other;

(b) a subsidiary of the other; or

5. Grant of licence.–(1) A public company eligible for a licence may apply to the Commission to be licensed as a futures exchange in such form and manner as may be prescribed.

(2) The application under sub-section (1) shall be accompanied by prescribed fee.

(3) The Commission may require an applicant to provide to the Commission such further information, as it considers necessary in relation to the application, in such form or verified in such manner as the Commission may direct.

(4) The Commission may, in writing, subject to such conditions or restrictions as it may consider fit to impose, grant licence to a public company as a futures exchange if the Commission is satisfied that the company shall operate a fair, efficient and transparent futures market, manage any risks associated with its business and operations prudently and enforce compliance by TRE certificate holders with its regulations:

Provided that a futures exchange shall only offer for trade futures contracts based on commodities and financial instruments.

(5) Where a licence is granted under this section to a securities exchange for operating a futures market, such licence shall be for offering for trade of futures contracts based on securities:

Provided that such futures exchange may also offer futures contract based on financial instruments to the extent and manner as may be notified by the Commission.

(6) In the exercise of its powers to grant licence under sub-section (4), the Commission shall have regard to, whether–

(a) the company in its regulations shall make satisfactory provision for–

(i) a fair, efficient and transparent market in futures contracts that are traded on its futures market;

(ii) the proper regulation and supervision of TRE certificate holder;

(iii) appropriate measures to protect the interest of customer:

(iv) an equitable allocation of the dues, fees and other charges levied by company;

(v) the trading in futures contracts by its officers and employees; and

(vi) any other matters as may be prescribed;

(b) the company possesses sufficient financial, human and system resources to,–

(i) establish and operate a fair, efficient and transparent futures market;

(ii) meet contingencies or disasters (including events such as technical complications occurring with automated systems);

(iii) provide adequate security arrangements; and

(iv) for any other matters as may be prescribed;

(c) the company has made arrangements with respect to the appointment, removal from office and functions of the persons responsible for making or enforcing the regulations of futures exchange, in such manner, to secure a proper balance–

(i) among the interests of TRE certificate holders of the company; or

(ii) among the interests of the company or TRE certificate holders and the public interest:

Provided that the arrangements shall not be regarded as satisfying these requirements unless the persons responsible for such matters include a number of persons independent of the company, TRE certificate holders and other regulated persons, in order to ensure sufficient balance referred to in sub-clause (ii);

(d) it would not be contrary to the public interest to licence the company; and

(e) any other matters as may be prescribed.

(7) Subject to the provisions of this Act, a futures exchange licence shall be granted subject to such annual renewal fee as may be prescribed.

6. Duties of futures exchange.–(1) It shall be duty of a futures exchange to ensure–

(a) a fair, efficient and transparent market in futures contracts that are traded on its futures market; and

(b) that risks associated with its business and operations are managed prudently.

(2) In discharging its duty under sub-section (1), a futures exchange shall–

(a) act in interest of the public; and

(b) ensure that interest of the investor, customer and the public at large prevails where it conflicts with the interest of the futures exchange, TRE certificate holders, shareholders, board of directors and management.

(3) A futures exchange shall operate its facilities in accordance with the provisions of this Act and rules and regulations made thereunder.

(4) A futures exchange shall regulate the operations, standards of practice and business conduct of TRE certificate holders (and their representatives and other employees) in accordance with the regulations, policies, procedures and practices of the futures exchange.

(5) A futures exchange shall formulate and implement appropriate procedures for ensuring that TRE certificate holder (and their representatives and other employees) comply with the provisions of this Act and rules and regulations made thereunder.

(6) A futures exchange shall preserve confidentiality with regard to all information in its possession concerning TRE certificate holder and their customers, except that such information may be disclosed by the futures exchange when required in writing to do so by the Commission or the clearing house under its regulations or if required under any law for the time being in force or if it is ordered to do so by the Court.

(7) A futures exchange shall have efficient procedures and arrangements for addressing customer’s complaints.

(8) A futures exchange shall put in place such structural provisions, operating procedures, and surveillance techniques to detect and prevent insider trading and market abuse.

(9) A futures exchange shall immediately notify to the Commission if it becomes aware:–

(a) of a financial irregularity or other matter which in opinion of the futures exchange may indicate that its financial integrity is in question or that it is unable to meet its legal obligations;

(b) that any TRE certificate holder is unable to comply with any regulation of the futures exchange or any financial resources regulation;

(c) of a financial irregularity or other matter which in the opinion of the futures exchange may indicate that the financial standing or integrity of a TRE certificate holder is in question or that a TRE certificate holder may not be able to meet its legal obligations; or

(d) of any insider trading or market abuse.

(10) A futures exchange shall immediately notify to the Commission any action against a TRE certificate holder.

(11) A futures exchange shall, for the conduct of its business, at all times provide and maintain–

(a) adequate and properly equipped premises;

(b) automated systems with adequate capacity, facilities to meet contingencies or emergencies, physical, virtual and logical security arrangements and technical support: and

(12) A futures exchange shall ensure that appointment or removal of chief executive officer and chief regulatory officer, by whatever name called, is made with prior approval of the Commission.

7. Regulations of futures exchange.–(1) Without limiting the generality of Section 5, the regulations of a futures exchange shall make provision to the satisfaction of the Commission–

(i) with respect to the constitution, powers and functions of the governing body of the futures exchange and matters relating to disciplining of the directors, officers and functionaries of the futures exchange;

(ii) with respect to the development of risk management system, including control measures and safeguards with respect to large exposures and matters connected therewith;

(iii) with respect to the risk management procedures, misalignment of incentives and conflict of interest between futures broker, its employees and its clients;

(iv) with respect to disclosure of conflict of interest by directors and employees of the futures exchanges;

(v) with respect to the eligibility, admittance and conduct of TRE certificate holder;

(vi) with respect to the appointment and functioning of internal auditors;

(vii) for the expulsion, suspension or disciplining of TRE certificate holder for conduct inconsistent with just and equitable principles in connection with trading in futures contracts, or for a contravention of the regulations of the futures exchange;

(viii) with respect to liquidation of the assets of futures brokers deposited with or in control of the futures exchange to fulfil customer claims arising therefrom;

(ix) with respect to the terms, conditions and specifications of futures contracts;

(x) with respect to the class or classes of futures contracts that may be traded by futures broker and the terms and conditions governing trading in futures contracts;

(xi) with respect to operational, information system and regulatory audit of futures broker and futures exchange including the regular assessment of trading systems as well as the assessment of reliability and effectiveness of all risk management and control measures implemented by futures exchange;

(xii) with respect to the mechanism for inspection and provisions relating to audit and compliance of futures’ brokers including cooperation with other licensed entities for violation of any requirement of this Act or any rules or regulations made thereunder;

(xiii) with respect to proprietary trading by futures broker:

(xiv) with respect to effective surveillance and monitoring techniques to detect and prevent insider trading and market abuse practices;

(xv) with respect to fair and properly supervised trading practices;

(xvi) with respect to the prohibition of trading in futures contract by futures brokers or their representatives, either directly or indirectly, for their own accounts or accounts of associated persons, except in accordance with the regulations of the futures exchange;

(xvii) with respect to measures to prevent manipulation, market rigging and artificial markets in its futures market;

(xviii) with respect to effective know your customer and customer due diligence policies and procedures and other matters ancillary to anti-money laundering;

(xix) with respect to the recording and publishing of details of trading;

(xx) with respect to financial integrity of futures broker such as to provide reasonable assurance that all obligations out of the trading in futures contract on the futures market of that futures exchange will be met;

(xxi) with respect to the fee and charges payable for facilities and services provided by the futures exchange;

(xxii) with respect to brokerage and other charges by futures brokers;

(xxiii) with respect to the equitable allocation of the dues, fees and other charges levied by the futures exchange;

(xxiv) with respect to settlement of claims and dispute resolution between any of its futures brokers, or between futures brokers and their customers, or between futures’ brokers and their accredited representatives or between accredited representative of futures brokers and their customers, in relation to any market contract of the futures exchange;

(xxv) where a futures broker appears to be unable, or likely to become unable, to meet his obligations in respect of one or more market contracts, to enable action to be taken to close out his position in relation to all unsettled market contracts to which he is a party including facilitation in default proceedings;

(xxvi) generally for carrying on the business of the futures exchange with due regard to the interests and protection of the investing public;

(xxvii) with respect to TRE holder financial responsibility whether by way of minimum capital or a ratio between net capital or aggregate indebtedness, or both;

(xviii) the processing and determination of investor complaints;

(xxix) with respect to the clearing and other arrangements made, and the financial condition of–

(a) the futures exchange;

(b) the clearing house of the futures exchange; and

such as to provide reasonable assurance that all obligations arising out of the trading in futures contracts on the futures market of that futures exchange will be met;

(xxx) with respect to classification of TRE holder into different categories and conditions attached thereto.

(2) The regulations of a futures exchange shall apply to–

(a) futures exchange, its employees and its directors and the futures exchange shall be responsible to ensure their compliance with such regulations; and

(b) futures broker, the representatives and other employees of futures broker and the futures broker shall be responsible to ensure their compliance with such regulations.

(3) The power to make regulations conferred by this section on the futures exchange shall be subject to the condition of previous placement of the said regulations on the website of the futures exchange along with the rationale for eliciting public opinion thereon within a period of not less than seven days starting from the date of its placement on the website:

Provided that, on an application by the futures exchange, the Commission may waive the condition of eliciting public opinion in cases requiring immediate implementation of proposed regulation.

(4) The Commission may, by notice in writing served on a futures exchange, require it–

(a) to make regulations specified in the notice within the period specified; or

(b) to amend regulations referred to in the notice in the manner and within the period specified in the notice.

(5) Where the Commission is satisfied that a futures exchange has not complied with a requirement referred to in sub-section (4) within the period specified in the notice, the Commission may make or amend the regulations specified in the notice instead of the futures exchange and the regulations so made or amended shall be deemed to have been made or amended by the futures exchange and shall have effect accordingly.

8. Approval of regulations or amendments to regulations of futures exchange.–(1) No regulation of a futures exchange or any amendment (whether by way of rescission, substitution, alteration or addition) to a regulation shall have effect unless it has the approval in writing of the Commission.

(2) A futures exchange shall submit or cause to be submitted to the Commission for its approval such regulations and every amendment thereto that require approval under sub-section (1), together with explanations of their purpose and likely effect, including their effect on the investing public, in sufficient detail to enable the Commission to decide whether to approve them or refuse to approve them.

(3) The Commission shall by notice in writing served on the futures exchange, give its approval or refuse to give its approval to such regulations or amendment of the regulations, as the case may be, or any part thereof.

(4) The Commission may give its approval under sub-section (3), subject to requirements that shall be satisfied before the regulations or amendment of the regulations or any part thereof take effect.

(5) Subject to the approval of the Commission under sub-section (3), all regulations or amendments to the regulations made by the futures exchange shall be notified in the official Gazette and shall take effect from such date as may be specified in the notification.

9. Statutory obligation of futures broker to comply with regulations of futures exchange.–Futures broker of a futures exchange shall comply with the regulations of that futures exchange.

10. Futures exchange to assist the Commission.–A futures exchange shall provide such assistance to the Commission as the Commission may require for the performance of functions and duties of the Commission, including the furnishing of such returns and the provision of such books and other information relating to the business of the futures exchange or in respect of trading in futures contracts or any other specified information as the Commission may require for the proper administration of this Act.

11. Review of disciplinary action taken by futures exchange.–(1) Where a futures exchange reprimands, imposes penalty, suspends, cancels TRE certificate or otherwise takes disciplinary action against a futures broker in accordance with its regulations, the futures exchange shall immediately inform the Commission in writing of the name of the futures broker, the reason for and nature of the action taken, the amount of any sum imposed by way of penalty and the period of any suspension.

(2) The futures exchange shall grant an opportunity of being heard to futures broker before it imposes a penalty, reprimands, suspends, cancels TRE certificate or otherwise takes disciplinary action against the futures broker:

Provided that where the futures exchange is satisfied that delay in the suspension of its futures broker shall be detrimental to the interest of investors or the public in general, the futures exchange may, after recording reasons in writing, immediately suspend futures broker till the time an opportunity of hearing is provided to the futures broker and a final decision is taken within a period of not more than thirty days.

(3) The Commission may, on its own motion or on application by an aggrieved person, review any disciplinary action taken by a futures exchange under sub-section (1) and may affirm, modify or set aside decision of the futures exchange after giving the futures broker and the futures exchange an opportunity of being heard.

(4) Nothing in this section shall preclude the Commission, in any case where a futures exchange fails to act against a futures broker, from suspending the licence of, or otherwise disciplining, a futures broker of the futures exchange, but before doing so the Commission shall give the futures broker and the futures exchange an opportunity of being heard:

Provided that where the Commission is satisfied that delay in the suspension of any futures broker shall be detrimental to the interest of investors or the public in general, the Commission may, after recording reasons in writing, immediately suspend any futures broker till the time an opportunity of hearing is provided to the futures broker and a final decision is taken within a period of not more than thirty days.

(5) Any action taken by a futures exchange under sub-section (1) shall be without prejudice to the power of the Commission to take such further action as it deems fit with regard to the futures broker or its licence.

12. Power of the Commission to issue directions to futures exchange.–(1) The Commission may, if considers necessary or expedient,–

(a) for ensuring fair, efficient and transparent futures markets, or for ensuring fair, efficient and transparent clearing and settlement of transactions in futures contract;

(b) for ensuring the integrity of, and proper management of systemic risks in, futures markets;

(d) in the interests of the public or for the protection of customers, issue directions to a futures exchange by notice in writing either of a general or specific nature.

(2) Without prejudice to the generality of sub-section (1), any direction issued under that sub-section may relate to–

(a) the trading or the termination of trading on or through the facilities of that futures exchange;

(b) the manner in which futures exchange carries on its business; or

(c) removing or suspending the directors or officers of the futures exchange from office or suspending futures brokers of the futures exchange; and

(d) the clearing or settlement of futures contract and the making of adjustments of contractual obligations arising out of those futures contract;

(e) any other matter that the Commission considers necessary for the effective administration of this Act or the rules and regulations made hereunder, and the futures exchange shall comply with any such direction.

13. Emergency powers of Commission.–(1) Where the Commission has reason to believe or decides on the recommendation of futures exchange that an emergency exists, or where the Commission considers it necessary or expedient in the interest of the public or section of the public or for the protection of investors, the Commission may direct by notice in writing a futures exchange to take such action as it considers necessary to maintain or restore fair, efficient and transparent trading in futures contracts or any class of futures contract including but not limited to–

(a) liquidate any position in respect of any futures contract or any class of futures contracts;

(b) terminate trading on a futures market;

(d) confine trading to liquidation of futures contracts positions;

(e) order the liquidation of all positions or part thereof or the reduction in such positions;

(f) limit trading to a specific price range;

(g) modify trading days or hours;

(h) after conditions of delivery or settlement;

(i) fix the settlement price at which positions are to be liquidated;

(j) require any person to act in a specified manner in relation to trading in futures contracts or any class of futures contracts;

(k) require margins or additional margins for any futures contracts; and

(l) modify or suspend any of the regulations of a futures exchange, and the futures exchange shall comply with that direction.

(2) Where the Commission suspends trading on a futures market under clause (c) of sub-section (1), the suspension shall be for a period not exceeding three months, provided that the Commission may, if it considers it necessary, extend the suspension for one further period not exceeding three months at the expiry of which the Commission shall either notify the futures exchange in writing that the suspension has expired, or proceed to cancel the futures exchange licence or pass such order as it deems appropriate.

FUTURES MARKET ACT, 2016

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