Markets regulator -- the Securities and Exchange Board of
India (Sebi) has permitted registered stock brokers to access the negotiated
dealing system-order matching platform for trading in government securities
under a separate business unit. The move came after the Reserve Bank of India
(RBI) in a notification on February 7, permitted access of Sebi-registered
non-bank brokers to access the Negotiated Dealing System-Order Matching
(NDS-OM). The regulator said ‘In order to facilitate Sebi-registered stock brokers
to participate in Government Securities (G-Secs) market in the NDS-OM, it has
been decided that they may do so under a Separate Business Unit (SBU) of the
stock broking entity itself’.
Sebi highlighted that matters related to policy,
eligibility, risk management, investor grievances, inspection, enforcement, and
claims for stock brokers trading on NDS-OM will be governed by the regulatory
framework of the respective authority. The business unit facilitating such
trading will also fall under its jurisdiction. According to the markets
watchdog, the stock brokers will be required to create a separate business unit
(SBU) within their entity, ensuring that its operations remain segregated from
their regular securities market activities. The stock brokers must maintain an
arm's-length relationship between their core securities operations and the
SBU's dealings in government securities.
Under the prescribed norms, the SBU will be exclusively engaged in activities of transacting on the NDS-OM platform only. Additionally, the brokers are required to prepare and maintain separate accounts for the SBU on an arm's-length basis, and the net worth of the business unit will be kept segregated from the net worth of the stock broker in the securities market. The Sebi has mandated that brokers must meet net worth criteria after excluding the account of the SBU. The regulator has also clarified that the activities of the business unit will be under the jurisdiction of another regulatory authority, Grievance Redressal Mechanism and Investor Protection Fund (IPF) of the stock exchanges and Sebi's SCORES will not be available for investors availing of the services of the SBU.
Source: Ace Equity
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