Markets regulator Sebi will put in place a framework for the Application Supported by Blocked Amount (ASBA) facility for investors in secondary market trading, similar to the existing system for IPO investors.
Sebi's board approved the proposal during its meeting here on Wednesday.
Through the proposed facility, which would be optional for investors as well as stock brokers, Sebi aims to bring in "efficiency in the secondary market ecosystem by allowing usage of same blocked amount towards margin and settlement obligations.
This would result in lower working capital requirements for the members.
"Under the proposed framework, stock brokers will be allowed to either directly settle the brokerage with the UPI clients or opt for Clearing Corporation's facility to deduct the standard rate of brokerage from the UPI block of the clients.
"The framework would be implemented in a phased manner to facilitate a smooth transition in the market," according to a release.
With the new facility, the client would continue to earn interest on his or her blocked funds in the savings account till the time amount is debited.
There would be "hassle-free and immediate unblocking of client's funds and/or return/ release of securities in case of member default".
It would also eliminate the custody risk of client collateral, which is presently retained by the members and not transferred to the clearing corporation.
Sebi said there would also not be any adverse impact on client pay-out even in case of member/ fellow client default.
"In case of a member default, ease of porting of the non-defaulting client to another member (as there will be no need for transfer of collateral from defaulting member to another member)," it added.
According to Sebi, there would be a direct settlement with the clearing corporation, without passing through the pool accounts of the intermediaries.
This would provide client-level settlement visibility to the clearing corporation and thus avoid the risk of co-mingling clients' funds and securities.
There would also be independent and reliable identification of ownership of cash collateral available to clearing corporations without the need to rely on reporting/ allocation by members, thereby eliminating the risk of inadvertently erroneous or fraudulent reporting by intermediaries, the release said.
Further, it would eliminate the custody risk of client collateral, which is presently retained by the members and not transferred to the clearing corporation.
Sebi said there would also not be any adverse impact on client pay-out even in case of member/ fellow client default.
