The Sebi board approved an ASBA-like facility for investors to trade on the secondary market. Under the proposed framework, stock brokers will be able to settle brokerage payments directly with UPI clients. They can also use CC’s facility to have the standard rate of brokerage taken out of the UPI block of the clients. SEBI says that investors and stock brokers will be able to choose whether or not to use the ASBA-like facility.
“The Board has given the green light for investors to use a facility like Application Supported by Blocked Amount (ASBA) to trade on the secondary market. The facility works by keeping funds from being traded on the secondary market through UPI “In a statement, SEBI said that.
“Furthermore, it will make the secondary market ecosystem more efficient by letting members use the same blocked amount for margin and settlement obligations. This will mean that members will need less working capital “said SEBI.
SEBI says that the framework would be put into place in stages to help the market make a smooth transition.
Application Supported by Blocked Amount (ASBA) facility has a number of advantages.
SEBI says that stock brokers and investors can get the following benefits from using an ASBA-like facility to trade in the secondary market.
- The client’s blocked savings account funds will continue to earn interest until the full amount is taken out.
- Direct settlement with Clearing Corporation (CC) without going through the pool accounts of the intermediaries. This gives CC visibility at the client level of the settlement and reduces the risk of clients’ funds and securities getting mixed up.
- Independent and reliable identification of who owns cash collateral available to CCs without having to rely on reporting/allocation by members (Trading Member/Clearing Member), eliminating the risk that intermediaries will report incorrectly or fraudulently.4. Elimination of the risk of keeping client collateral that is currently held by members and not given to CC.
- If a member defaults, their money and/or securities can be unblocked right away and without any trouble.
- Even if a member or fellow client doesn’t pay, it doesn’t hurt the client’s payout.
- If a member goes out of business, it should be easy to move a non-defaulting client to another member (as there will be no need for transfer of collateral from defaulting member to another member).
“From an investor’s point of view, SEBI’s current ASBA-like facility is a good thing. This initiative will help retail investors have access to their own funds at any time, which will eliminate the possibility of fraud or misuse of funds by brokers or sub-brokers, which has happened often,” said A R Ramachandran, Co-founder and Trainer at Tips2trades.
Source: Team CurrencyVeda