To enable faster arbitration between market intermediaries, capital market regulator Securities and Exchange Board of India (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, Sebi has introduced a system of ‘Automatic Process’ and ‘Common Pool’ for selection of arbitrators which would be effective from 1 April.

As per the new norms, a list of arbitrators on the panel of stock exchanges having nationwide 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.

As per the regulator, the automatic process would send a system generated, real time alert such as an short message service (sms) and e-mail to all entities involved in the particular case.

Further, the communication for the appointment of the arbitrator would be sent immediately or latest by the next working day by the stock exchange on which the dispute had taken place.

As per the guidelines, an arbitrator would have to decline an arbitration reference in case there is a “probable conflict of interest”. “After the said arbitrator declines, the automatic process’ will pick the name of another arbitrator.

“This would continue till the time there is no conflict of interest, by the selected arbitrator”, the regulator said.

The timeline for choosing the arbitrator could be extended from existing 30 days period, but in that case, stock exchanges “ shall put on record the reasons of such extension”, it added.

Further, in cases where conflict of interest is observed, the arbitrator has to send in the information for the same to the stock exchange within 15 days of receipt of communication.

Sebi said that the fees of arbitrator “shall be dealt in line with existing provisions, by the stock exchange on which the dispute had taken place”. (PTI)