SEBI New Rule For Trading: Taking steps to protect investors’ money from misuse and default by stock brokers, market regulator SEBI on Monday introduced an alternative process for trading in the securities market.
SEBI New Rule For Trading: Taking steps to protect investors’ money from misappropriation and stockbrokers’ defaults, market regulator SEBI on Monday introduced an alternative process for trading in the securities market. In the new system, instead of transferring the amount to the trading member, there will be a provision to keep the investors’ money ‘blocked’ in their own bank accounts. This arrangement will be similar to the existing ‘application based amount block’ facility in the primary market (IPO buy-sell market). In this, the money of the investors comes out of the account only when the allotment of shares is done.
The new rule will be applicable from January 1, 2024
The Securities and Exchange Board of India (SEBI) said in a circular that the new system will come into effect from January 1, 2024. Under this arrangement the funds will remain in the customer’s account but will be ‘blocked’ in favor of the clearing corporation. The amount will remain ‘blocked’ till the specified time or release from the Clearing Corporation.
Settlement of funds and securities as per SEBI shall be done by the Clearing Corporation. For this, there will be no need for maintenance of funds and securities of the clients by the member. Through this process, the amount of the customers will not be misused. Also, the broker will not be able to default in returning the money to the customers. Overall, there will be no risk regarding the capital.
Let us tell you that for customers who block lump sum amount, they can be debited multiple times for different settlement obligations. This arrangement will start in the equity cash segment. The Clearing Corporation may later extend this facility to other areas as well.
SEBI said that this facility is optional for investors as well as stock brokers. Since investors are allowed to have ‘trading’ accounts with different stock brokers, an investor can choose to have a UPI based ‘block’ facility with some brokers, while with others the other way around. This will reduce the working capital requirement of the members.
