Market Regulatory Authority Sebi’s Board of Directors has approved an ASBA-like facility for trading on the secondary market for investors. Stockbrokers will be able to settle brokerage payments directly with UPI clients under the proposed framework, or they may choose to use CC’s facility to deduct the standard brokerage rate from client UPI block. According to SEBI, an ASBA-like facility will be optional for investors as well as stockbrokers.
“The Board approved the broad framework for Applications Backed by Blocked Amounts (ASBA) like the one provided for investors to trade on the secondary market. This facility is based on blocking funds traded on the secondary market through UPI,” SEBI said in a statement.
“Furthermore, it will bring efficiency in the secondary market ecosystem by allowing the same amount of blocked funds to be used for margin and settlement obligations, thus resulting in working capital requirements. lower for members,” SEBI said.
According to SEBI, the framework will be rolled out in phases to facilitate a smooth transition in the market.
Benefits of the application backed by the Blocked Amount facility (ASBA)
According to SEBI, these are the benefits that stockbrokers and investors can get by using an ASBA-like facility to trade on the secondary market.
1. The customer continues to earn interest from the blocked amount in his savings account until the amount is debited.
2. Direct settlement with Clearing Company (CC), without going through joint accounts of intermediaries, thus providing client level payment visibility to CC and thus avoiding risk of mixing clients’ money and securities.
3. Independent and reliable determination of ownership of cash collateral available to CCs without relying on reports/allocations of members (Trading Members/Clearing Members) minus), thereby eliminating the risk of an intermediary inadvertently misreporting or committing fraud.
4. Eliminates custody risk for client collateral currently held by members and not transferred to CC.
5. Unlock customer funds and/or return/release securities in case of member default easily and immediately.
6. There is no adverse impact on the customer’s payment even in the event of a member/client’s default.
7. In case a member violates, it is easy to transfer non-violent customers to another member (because there will be no need to transfer the collateral from the offending member to another member).
“The current ASBA-like facility introduced by SEBI is a positive move from an investor’s perspective. This initiative will help retail investors gain access to their own funds wherever they go. at any time, thus eliminating the chance of fraud or misuse of funds by brokers or sub-brokers as has been seen on a regular basis,” said AR Ramachandran, Co-Founder & Coach-Tips2trades know.
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