Sebi's new system for selecting arbitrators

To enable faster arbitration between market intermediaries, capital market regulator Sebi on Monday announced an automated system for selection of arbitrators from a common pool.

The automatic process would be triggered in cases where the members and clients of stock exchanges fail to find an arbitrator, from a list compiled by the bourses, to resolve their disputes.

Presently, an arbitrator is selected by the bourses that help settle disputes between a client and broker, or disputes among brokers. Amending the arbitration mechanism, the Securities and Exchange Board of India (Sebi) has introduced a system of ‘Automatic Process’ and ‘Common Pool’ for selection of arbitrators which would be effective from April 1.

As per the new norms, a list of arbitrators on the panel of stock exchanges having nation-wide trading terminals would be pooled and called ‘Common Pool’. This list would be made available to public. In a circular on Monday, Sebi said that in the cases where the client and member (stock broker, trading member or clearing member) fail to choose an arbitrator from the common pool, one would be chosen from the ‘automatic process’ wherein neither the parties to arbitration nor the concerned stock exchanges will be directly involved.

“The automatic process will entail a randomised, computer generated selection of arbitrator from the list of arbitrators in the common pool,” Sebi said.

“The selection process shall be in chronological order of the receipt of arbitration reference that is only after selecting an arbitrator for the former arbitration reference received, selection for the latter shall be taken up,” it added.