Sebi allows 'omnibus' trade structure at Gift City to ease market access

Capital market regulator Securities and Exchange Board of India (Sebi) on Thursday allowed ‘omnibus’ trades at the Gujarat International Finance Tec-city (GIFT City), India’s only international financial service centre (IFSC). An omnibus structure allows an investor trade through a broker or service provider with confidentiality. Such structures are allowed at major jurisdiction worldwide.

“With a view to further facilitate ease of market access for foreign investors and based on feedback received from market participants, it has been decided to permit segregated nominee account structure in IFSC,” Sebi said in a circular.

“Orders of foreign investors may be routed through eligible segregated nominee account providers for trading on stock exchanges in IFSC,” the circular added.

Experts say absence of such a framework was preventing investors from trading at Gift City, which is designed on the lines of tax-friendly jurisdictions such as Dubai and Singapore. The latest move will give a fillip to Gift City, they added.

Permission for omnibus trading comes at a time when Indian exchanges have snapped ties with foreign bourses in order to curb offshore trading of Indian products.

“This brings Gift City at par with any international market. Earlier, foreign portfolio investors (FPIs) couldn’t trade at Gift without setting up a shop there. Omnibus structure will now allow them to trade directly,” said an exchange official.

For instance, FPIs such as BlackRock or Fidelity will now be able to trade through a service provider or broker present at Gift City. More importantly, the broker routing the order will not have to disclose the identity of these investors.

Experts say such a structure is not allowed while trading onshore. As the broker has to provide the name of the end user—client code—while placing an order in the domestic market.

Experts say Sebi has placed enough safeguards to prevent abuse of the new framework at Gift.

“It shall be obligatory on the stock exchanges, brokers and provider to furnish to Sebi information relating to trades, including KYC details of their end-clients, as and when requested,” the circular says.