Sebi okays ASBA-like facility for secondary market

The Securities and Exchange Board of India (Sebi) board met in Mumbai on Wednesday, 29 March 2023, approved the broad framework for Application Supported by Blocked Amount (ASBA) like facility being made available to investors for secondary market trading.

The facility is based on blocking of funds for trading in secondary market through UPI. Client continues to earn interest on his blocked funds in his savings account till the time amount is debited. The said facility shall be optional for investors as well as stock brokers, a Sebi release stated.

The regulator said that there were several benefits for such a facility. Among those, the investor will earn interest on his blocked funds. It will also facilitate direct settlement with Clearing Corporation (CC), without passing through pool accounts of the intermediaries, thereby providing client level settlement visibility to CC and thus avoiding the risk of co-mingling of clients` funds and securities.

The facility will eliminate custody risk of client collateral which is presently retained by the members and not transferred to CC.

Further, it shall bring efficiency in the secondary market ecosystem by allowing usage of same blocked amount towards margin and settlement obligations and thus shall result in lower working capital requirements for the members.

Under the proposed framework stock brokers will be allowed to either directly settle the brokerage with the UPI clients or opt for CC`s facility to deduct standard rate of brokerage from the UPI block of the clients.

The framework would be implemented in a phased manner to facilitate smooth transition in the market.

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