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Informist, Friday, Apr. 24, 2026

MUMBAI – The Securities and Exchange Board of India Friday floated consultation paper to review variable net worth requirements for the stock brokers to correspond to operational risks and to protect interests of investors. As per the paper, the market regulator has recommended the stock brokers to maintain variable net worth based on both the average credit balance of clients' funds and the number of active clients. The comments for the same can be submitted latest by May 15. 

The market regulator has now proposed to calculate the variable net worth based on the 10% of average credit balance of all clients over six months. Further, for stock brokers who have direct clients, INR 5 million can be added to the variable net worth, if the number of active clients are between 10,000 and 50,000. Further, INR 5 million can be added to the net worth for every additional 50,000 active clients.

If the stock brokers have clients through authorised persons, INR 500,000 can be added to the variable net worth for up to 2,500 clients held and INR 2.5 million can be added if the number of such clients fall between 2,500 and 10,000. For the subsequent 10,000 active clients, INR 5 million can be added. 

This proposal follows the introduction of upstreaming framework under which the stock brokers had to transfer funds of clients to clearing corporations, consequently leaving only minimal cash balance with them to calculate variable net worth. This is being done in light of net worth being considered as "second line of defence", first being margin, where in sufficient capital is needed to cover the risk that is not covered by margins. End

Reported by Gopika Balasubramanium

Edited by Akul Nishant Akhoury

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