Sebi to pilot Asba-like framework for secondary markets in December: Report

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The Securities and Exchange Board of India (Sebi) will run a pilot for the Asba-like facility for the secondary markets in December this year, Mint reported on Wednesday. Under the mechanism, money will be transferred only after the actual transfer of the security takes place. Till then, the funds will remain in the investor's bank account and earn interest.

In June, Sebi announced it would launch an Asba-like mechanism for secondary markets. Application Supported by Blocked Amount (Asba) facility is already available for the primary market, which ensures that money from an investor gets moved only when an allotment happens.

The new facility for secondary markets will go live by January 1, 2024, Sebi had then said.

Under the framework, funds will remain in the account of the client but will be blocked in favour of the clearing corporation (CC) till the expiry date of the block mandate or till the block is released by the CC or debit of the block towards obligations arising out of the trading activity of the client, whichever is earlier.

Further, settlement for funds and securities will be done by the CC without the need for handling of client funds and securities by the member. The process safeguards clients' assets from misuse, brokers' default and consequent risk to their capital.

While a unified payments interface (UPI) block upon creation would be considered towards collateral, the same would also be available for settlement purposes. For the clients who prefer to block lump sum amounts, their block can be debited multiple times, subject to the available balance, for settlement obligations across days.

The facility will be provided by integrating the Reserve Bank of India (RBI)-approved UPI mandate service of single-block-and-multiple-debits with the secondary market trading and settlement process called "UPI block facility".

To begin with, the facility will be made available in the equity cash segment. The CCs may extend the facility to additional segments subsequently.

Explaining the features of the new framework, Sebi said that the facility would be optional for investors as well as stock brokers. Since an investor is allowed to have trading accounts across multiple stock brokers, an investor can choose to avail UPI block facility under some brokers and non-UPI-based trading under others.

This would result in lower working capital requirements for the members.

(With PTI inputs)