RBI opens NDS-OM platform for stock brokers to boost retail participation

Currently, membership open to entities such as banks, primary dealers, insurers, MFs

The Reserve Bank of India (RBI) announced on Friday that it will allow non-bank brokers registered with the Securities and Exchange Board of India (Sebi) to access the negotiated dealing system-order matching (NDS-OM) platform.

 

This move is intended to expand retail participation in government securities.

 

The NDS-OM platform, operated by the RBI, is an anonymous order-matching system for secondary market trading in government securities (G-Secs).

 

“To enhance access for retail investors to government securities, the Reserve Bank will expand access to the NDS-OM platform, the electronic trading platform for secondary market transactions in government securities, to non-bank brokers registered with Sebi,” said RBI Governor Sanjay Malhotra.

 

Sebi had proposed a consultation paper in October 2024 outlining a framework where stock brokers could engage in trading of G-Secs through a separate business unit. Given that stock brokers typically serve a large number of retail clients, access to the NDS-OM system is expected to boost retail participation.

 

Currently, membership to the NDS-OM system is open to entities such as banks, primary dealers, insurance companies, and mutual funds, which maintain Subsidiary General Ledger (SGL) accounts with the RBI.

 

In a notification issued on Friday, the RBI updated the master directions to include details for the stock market connect. Eligible stock brokers wishing to provide access to their individual clients will need to apply to the RBI.

 

These stock brokers will also need to ensure they have an agreement with a member of the securities settlement segment of the Clearing Corporation of India (CCIL) for transaction settlements.

 

“The proposed measure will enhance the ease of exit for retail investors in government securities, thereby boosting their overall liquidity. With this improved liquidity, we anticipate greater interest from retail investors in government securities, especially if brokers integrate their trading platforms with NDS-OM,” said Deep Inder Singh, vice-president and sector head for financial sector ratings at ICRA.

 

Currently, individual investors can purchase government securities and sovereign gold bonds through the RBI's retail direct portal.

 

In its draft circular, Sebi had called for measures to ring-fence the securities market activities of stock brokers from those of the NDS-OM. Brokers will need to maintain a separate account for this business unit, ensuring an arm's-length relationship. 

Enhanced Scope

 

*  Move to expand retail participation in g-secs

 

*  Currently, membership to the NDS-OM system is open to entities such as banks, primary dealers, insurance firms, MFs 

 

*  They have to maintain subsidiary general ledger accounts with the RBI