Market regulator Sebi considers tighter norms for proprietary trades

Markets regulator plans to make Industry Standards Forum a permanent feature

The Securities and Exchange Board of India (Sebi) is considering segregation of settlement for proprietary trades and retail trades to avoid misuse and circumvention by certain brokers, its chairperson Madhabi Puri Buch said on Monday.

Proprietary trading refers to trades done by brokers and other financial institutions using their own capital.

“There are some people who are permitting access to their clients through prop accounts for a variety of reasons, including wanting to fund their margins. The industry has made a representation to us that there are different revenue models that brokers have and that some of those models may look like a misuse but it is not. We will analyse all of that in a very balanced way to separate wheat from the chaff,” said Buch.

“That is something we can look at. We can also look at segregation of settlement so that there is no netting between client and proprietary,” she said at the launch of brokers’ standards forum here.

The forum has been formed as a pilot project with members from three broker associations — the association of National Exchange Members of India (Anmi), Bombay Stock Exchange Brokers Forum (BBF), and Commodity Participants Association of India (CPAI).

The standard setting body also comprises members from the stock exchanges, depositories, and domestic and foreign custodians. The forum, which sets implementation standards for various new and past Sebi regulations, was first formed in September 2023.

Sebi chairperson said that the Industry Standards Forum will become a permanent feature and will be embedded in the regulations.

“We have briefed our board that from the various pilots that we are running, we see tremendous benefits. Therefore, it is our desire that it should become a permanent feature in the regulatory architecture,” said Buch.

On market hour extension proposal by the National Stock Exchange (NSE), the Sebi chair said there are “very divergent” views amongst the brokers.

“The brokering community itself is a divided house (on this). There is a lot of discussion and deliberation going on. They will be reaching a conclusion in some reasonable timeline,” said Buch.