SEBI Issues Guidelines to Stock Brokers on NDS-OM Participation

Mumbai, India - The Securities and Exchange Board of India (SEBI) has released guidelines for stock brokers participating in the Negotiated Dealing System-Order Matching (NDS-OM), a platform for secondary-market trading in government securities.

In a circular issued on Tuesday, SEBI said that registered stock brokers can set up a separate business unit (SBU) to facilitate participation in NDS-OM. The market regulator emphasized that all activities of the SBU will fall under the jurisdiction of the respective regulatory authority.

SEBI's introduction of these guidelines comes after the Reserve Bank of India permitted non-bank brokers to participate in NDS-OM to ease use for retail investors.

The key safeguards introduced by SEBI include:

1. Separating NDS-OM activities from securities market-related activities and maintaining an arms-length relationship between them.
2. Ensuring that the SBU exclusively transacts on NDS-OM and does not engage in other activities.
3. Maintaining a separate account for the SBU on an arms-length basis.
4. Keeping the net worth of the SBU segregated from the net worth of the stock broker.

SEBI also informed that while the transactions under the SBU's jurisdiction would fall under different regulatory authority, SEBI's grievance redressal mechanism and investor protection fund (IPF) would not be available for investors using these services.