Sebi has permitted registered stock brokers to trade in government securities under a separate business unit. This decision follows RBI’s recent notification allowing access to the Negotiated Dealing System-Order Matching (NDS-OM) platform.
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).
“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,” the regulator said in a circular.
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, the circular said.
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 Securities and Exchange Board of India (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.
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