The Securities Exchange Board of India (“SEBI”), in exercise of powers conferred under Section 11(1) of Chapter IV of the Securities and Exchange Board of India Act, 1992, read with Regulation 30 of the SEBI (Stock Brokers) Regulations 1992, vide Circular No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/14[1], dated February 11, 2025, issued certain safeguards for providing facilitation to SEBI registered stockbrokers to access Negotiated Dealing System-Order Matching (“NDS-OM”) for trading in Government Securities.
The Reserve Bank of India (RBI), through its notification dated February 07, 2025, has permitted SEBI – registered non-bank brokers to access the NDS-OM, as outlined in the Master Direction – Reserve Bank of India (Access Criteria for NDS-OM) Directions, 2025.
SEBI-registered stockbrokers may participate in the Government Securities (G-Secs) market on NDS-OM through a Separate Business Units (“SBUs”) within their stockbroker entity, as per the specified guidelines. All policy matters, including eligibility, risk management, investor grievances, and enforcement, shall be governed by the regulatory framework of the respective authorities, with the activities of the SBU falling under its jurisdiction.
To demarcate regulatory obligations and ensure a clear distinction between the stockbroker’s activities and NDS-OM operations, key safeguards have been introduced, as follows:
- Stockbrokers shall ensure that NDS-OM activities under the SBU are segregated and ring-fenced from the stockbroker’s securities market activities, maintaining an arms-length relationship between such activities.
- The SBU shall be exclusively engaged in NDS-OM transactions only.
- Stockbrokers shall maintain a separate account for the SBU on an arms-length basis.
- The net worth of SBU shall be kept separate from the stockbroker’s net worth in the securities market and the stockbroker must satisfy the net worth criteria, excluding the SBU’s account.
Further, since the activities of the SBU shall be under the jurisdiction of another regulatory authority, the grievance redressal mechanism and Investor Protection Fund (IPF) of the stock exchanges, as well as the ‘SCORES’ platform, shall not be available for investors using the services of the SBU.
[1]https://www.sebi.gov.in/legal/circulars/feb-2025/facilitation-to-sebi-registered-stock-brokers-to-access-negotiated-dealing-system-order-matching-nds-om-for-trading-in-government-securities-separate-business-units-sbu-_91764.html