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The Securities and Exchange Board of India (Sebi) is considering taking steps to promote retail participation in government securities (G-Secs) through stock brokers.
In a consultation paper released on Friday, the market regulator proposed to allow registered stockbrokers to participate in the G-Secs market through the Negotiated Trading System-Order Matching (NDS-OM) – managed by the Reserve Bank of India (RBI).
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NDS-OM is an anonymous order matching system for secondary market transactions in G-Secs.
Stockbrokers will be permitted to do so within a separate business unit (SBU). Since stock brokers have a high number of retail clients, access to the NDS-OM system is expected to provide a boost to retail participation.
At present, the NDS-OM system is open for membership by entities such as banks, primary dealers, insurance companies, mutual funds, etc., which maintain accounts of the large Subsidiary General Ledger (SGL) with the RBI.
“Issues related to policy, eligibility criteria, risk management, investor grievances, inspection, enforcement, complaints, etc., for stock brokers to carry out transactions on NDS-OM would be specified in the regulatory framework issued by the respective regulatory authority, and all activities of the stockbrokers business unit facilitating trading on NDS-OM would fall within the jurisdiction of that regulatory authority », indicates the consultation document.
The market regulator has proposed measures to separate the stock exchange activities from those of NDS-OM.
Securities dealers will be required to prepare and maintain a separate account for the SBU on an arm’s length basis, and the net worth will be considered separately.
“Securities brokers must ensure that the activities of the NDS-OM under an SBU are separate and isolated from the securities market-related activities of the securities broker, and that an arm’s length relationship between these activities be maintained,” Sebi said in the statement. draft circular.
The market regulator added that since the activities of this separate unit will be under the jurisdiction of another regulatory authority, the grievance redressal mechanism and investor protection fund of the exchanges will not be available to the investors benefiting from this service.
Sebi has sought public comments on the proposals by October 25.
First publication: October 4, 2024 | 7:36 p.m. STI