Depositories ready ground for the secondary market ASBA facility

The Central Depository Services (CDSL) has said that it will release the ‘UPI block facility’ on December 29 and will be made effective from the following day.

The move comes ahead of implementation of the so-called ASBA (application supported by blocked amount) facility for the secondary market. The markets regulator plans to introduce the ASBA facility from January 1 as an optional basis.  The facility will only be for the equity cash segment in the beginning. The move will help prevent misuse of client funds by brokerages.

In a communication to brokerages, CDSL has also issued the operational modalities for the mechanism. CDSL circular states that the facility will be optional for both the stock broker and the investors. The investor will be able to register for it only if the stock broker has also opted for the UPI block facility.

Further, the stock exchanges will have a provision to store the registration details in the unique client code database which will be shared to the clearing corporations.

Under the ASBA framework, settlement of funds and securities will be done by the clearing corporation without the need of the stock broker to handle the funds. 
 

A similar process is followed for the primary market where the amount is blocked in the investor’s account till allocation.

Funds and securities will remain in the bank and demat account of the client respectively but will be blocked in favour of the clearing corporation till the expiry date of the block mandate or debit for obligating the trades done by the investors.