Warehousing Of Stocks By Brokers Allowed

The Securities and Exchange Board of India (Sebi) has allowed warehousing of stocks by brokers for institutional investors, subject to conditions.

Warehousing involves the execution of a large client order in parts during a settlement period and the issuance of a single contract note at the weighted average price at the end of the period.

A Sebi notification issued yesterday set the following terms:

Warehousing will be allowed only against institutional client orders (both purchase and sale) and not on the brokers own account.

A registered custodian has to be involved in the delivery or receipt of securities.

Warehousing will be allowed only for orders through the normal book (general segment). It will not be allowed for negotiated transactions or all or none or other such transactions.

 

The trading software of the stock exchanges have to provide a unique order number to identify warehousing orders at the time of entry of the order.

The executed warehousing order will be parked in a separate client-warehousing account.

Daily margins, as prescribed by stock exchanges, will be imposed on all warehousing trades.

The broker will issue a confirmation note to the client, detailing the amount of the order executed, within 24 hours of the execution of the order.

A contract note, quoting the weighted average price, will be issued within 24 hours of the end of the trading period. Details of all trades executed to arrive at the weighted price has to be stated in the note or as an annexure. The contract note should have the same client code as on the confirmation note.

An order may be executed over a number of days within the same trading cycle.

All warehousing transactions must result in deliveries.