SEBI on Tuesday mandated brokers to establish a separate business unit (SBU) to trade in government securities (G-Secs) through the Negotiated Dealing System–Order Matching (NDS-OM).
This follows the Reserve Bank of India’s announcement at the recent monetary policy briefing to extend access of NDS-OM to non-bank brokers to facilitate retail participation. NDS-OM is an electronic order-matching system used for secondary market trading in G-Secs. Earlier, NDS-OM was available only to regulated entities and to the clients of banks and standalone primary dealers.
The SBUs will exclusively handle transactions on the NDS-OM platform, SEBI said in a circular.
Ring-fence NDS-OM
It directed brokers to ring-fence the NDS-OM unit from other securities-market related activities and maintain an arm’s length relationship.
Brokers must maintain distinct accounts for the SBU, the net worth criteria for the stock broking entity to be satisfied excluding the SBU’s finances.
Further, the regulator has clarified that its complaints redressal system (SCORES), as well as the grievance redressal mechanism and Investor Protection Fund (IPF) of stock exchanges will not cover investors using the SBU’s services.