SEBI Unveils ASBA-like Facility forTrading in Secondary Market

Markets regulator the Securities and Exchange Board of India (SEBI) has unveiled an application supported by the blocked amount (ASBA)-like process for trading in the secondary market on June 26, 2023.

This facility would block funds in an investor’s bank accounts for secondary market trading, instead of transferring the funds upfront to the trading member.

This new facility will come into effect from January 1, 2024. The facility would be provided integrating the Reserve Bank of India (RBI)-approved Unified Payments Interface (UPI) mandate service of single-block and multiple-debit with the secondary market trading and settlement along with UPI block facility, as per the markets regulator.

This would be similar to the ASBA-like facility that is currently available in the primary market or initial public offerings (IPOs).

The step is expected to provide a further fillip to the usage of UPI by retail investors. The introduction of UPI will extend an enhanced layer of security thus protecting an investor’s assets against possible misuse as well as other capital risks.

As per the proposed framework, funds will remain in the account of a client but will be blocked in favour of the Clearing Corporation (CC) until the block mandate expires or till it is released by the CC, or debit of the block towards obligations arising out of the trading activity of the client, whichever comes first.

In addition, settlement for funds and securities will be undertaken by the CC without the requirement for handling client funds and securities by the member.

This process leads to safeguarding of assets of client against misuse, and control brokers’ default while offering a convenient route for payments.

The facility will be optional for investors, as per SEBI. Also, all cash collaterals will be provided only via UPI block.

As per the new initiative, the markets regulator has set a single block threshold of Rs 5 lakh, as is the norm at the moment for UPI-based securities market transactions. It is possible for users to create multiple blocks subject to the overall limit applicable in UPI, states SEBI.

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