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Informist, Friday, Oct. 4, 2024

--SEBI releases draft circular on allowing stock brokers to use NDS-OM

NEW DELHI – The Securities and Exchange Board of India Friday released a draft circular proposing that stock brokers can use the Negotiated Dealing System – Order Matching platform to deal in government securities. They can offer these services through a separate business unit on an arms-length basis, the draft circular said.

The NDS-OM platform is operated by the Reserve Bank of India, and hosted by Clearing Corp. of India Ltd, which acts as a central counterparty. The platform is an anonymous electronic trading platform for government bonds, state government securities, and Treasury bills. Currently, membership of the platform is limited to institutions which maintain subsidiary general ledger accounts with the RBI.

"All the matters relating to policy, risk management, administration, supervision, enforcement, investor grievance and claims related to trading in government securities on NDS-OM by stock brokers would come under the jurisdiction of the respective regulatory authority," according to the draft circular. SEBI has invited comments on the draft norms by Oct. 25.

The move is aimed at generating more retail participation in the government securities market, in line with the government's push, the circular said. The RBI in November 2021 launched a Retail Direct platform for retail investment into the government securities market, which is dominated by institutional investors. As of Sept. 30, it had garnered 250,549 registrations, with only 171,269 accounts opened, according to data available on the website.

Since the two activities will fall under different regulatory jurisdictions, SEBI said stock brokers should ring fence the NDS-OM activities. As a result, the proposed Separate Business Unit can only be used for NDS-OM activities, with a separate account. Further, the circular said stock brokers should segregate the NDS-OM business unit's net worth from its securities market activity. 

"As the activities of the SBU (Separate Business Unit) shall be under the jurisdiction of another regulatory authority, Grievance Redressal Mechanism and Investor Protection Fund of the stock exchanges and SCORES shall not be available for investors availing the services of the SBU," the draft circular said.  End

Reported by Aaryan Khanna

Filed by Ashish Shirke

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