Date: 2025-02-11Category: Not ApplicableState: Union GovernmentCountry: India
Facilitation to SEBI registered Stock Brokers to access Negotiated Dealing System-Order Matching (NDS-OM) for trading in Government Securities- Separate Business Units (SBU)
**Summary:**
This circular, issued by the Securities and Exchange Board of India (SEBI) on February 11, 2025, outlines the framework for SEBI-registered stock brokers to access the Negotiated Dealing System-Order Matching (NDSOM) platform for trading in Government Securities (G-Secs) through a Separate Business Unit (SBU). This initiative follows the Reserve Bank of India's (RBI) notification dated February 07, 2025, which permits SEBI-registered non-bank brokers to access NDSOM, as per the Master Direction Reserve Bank of India Access Criteria for NDSOM Directions, 2025.
The circular details that stock brokers participating in the G-Secs market via NDSOM must do so under an SBU within their existing entity. The policy, eligibility, risk management, investor grievances, inspection, enforcement, and claims related to stock brokers' NDSOM transactions will be governed by the respective regulatory authority's framework.
Key safeguards are prescribed to maintain regulatory obligations and segregate activities:
* NDSOM activities within the SBU must be segregated and ring-fenced from the stock broker's securities market activities, maintaining an arm's-length relationship.
* The SBU must exclusively engage in NDSOM transactions.
* Stock brokers are required to maintain a separate account for the SBU on an arm's-length basis.
* The SBU's net worth must be segregated from the stock broker's net worth in the securities market, and the stock broker's net worth criteria must be met after excluding the SBU's account.
The circular also clarifies that the Grievance Redressal Mechanism, Investor Protection Fund (IPF) of stock exchanges, and SCORES will not be available to investors using the SBU's services, as the SBU's activities fall under the jurisdiction of another regulatory authority.
This circular is issued under Section 11I of Chapter IV of the Securities and Exchange Board of India Act, 1992, and regulation 30 of the SEBI Stock Brokers Regulations 1992. The purpose is to protect investors' interests, promote the development of securities markets, and regulate these markets. The circular is available on the SEBI website (www.sebi.gov.in) under the "Legal Circulars" category.
For further information, contact Aradhana Verma, General Manager, at Tel. No.: 022-26449633 or via email at aradhanad@sebi.gov.in.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): Regulatory authority for securities markets in India that issued the circular.
Stock Exchanges: Recognized stock exchanges to whom the circular is addressed.
Stock Brokers: SEBI registered stock brokers who are permitted access to Negotiated Dealing System-Order Matching (NDS-OM).
Negotiated Dealing System-Order Matching (NDS-OM): A platform for trading in Government Securities (G-Secs).
Government Securities (G-Secs): Securities issued by the government that stock brokers can trade on the NDS-OM platform.
Reserve Bank of India (RBI): The central bank of India, which permitted SEBI-registered non-bank brokers access to NDS-OM.
Master Direction Reserve Bank of India Access Criteria for NDSOM Directions, 2025: RBI document that allows SEBI registered non-bank brokers access to NDSOM.
Securities and Exchange Board of India Act, 1992: The act under which SEBI exercises its powers.
CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/14 February 11, 2025
To,
All recognized Stock Exchanges
Stock Brokers through Recognized Stock Exchanges
Dear Madam / Sir,
Sub: Facilitation to SEBI registered Stock Brokers to access Negotiated Dealing
System-Order Matching (NDS-OM) for trading in Government Securities-
Separate Business Units (SBU)
1. Reserve Bank of India vide its notification dated February 07, 2025 permitted access
of SEBI-registered non-bank brokers to Negotiated Dealing System-Order Matching
(NDS-OM) through Master Direction - Reserve Bank of India (Access Criteria for
NDS-OM) Directions, 2025.
2. In order to facilitate SEBI-registered stock brokers to participate in Government
Securities (G-Secs) market in the NDS-OM, it has been decided that they may do
so under a Separate Business Unit (SBU) of the stock broking entity itself, in the
manner specified herewith.
3. The matters related to policy, eligibility criteria, risk management, investor
grievances, inspection, enforcement, claims etc. for stock brokers to transact on
NDS-OM would be specified under the regulatory framework issued by the
respective regulatory authority and all activities of the business unit of stock broker
facilitating trading on NDS-OM would be under the jurisdiction of that regulatory
authority.
4. In pursuance of the above regulatory jurisdiction, to demarcate the regulatory
obligations and to ring fence the activities of the stock brokers and its NDS-OM
activities, some of the key safeguards are being prescribed as under:
3.1 Stock brokers shall ensure that activities of the NDS-OM under a SBU
are segregated and ring-fenced from the securities market related
activities of the stock broker and arms-length relationship between
these activities are maintained;
Page 1 of 23.2 Such SBU shall be exclusively engaged in activities of transacting on
NDS-OM only;
3.3 Stock brokers shall prepare and maintain a separate account for the
SBU on arms-length basis;
3.4 The net worth of the SBU shall be kept segregated from the net worth
of the stock broker in the securities market. Net worth criteria for stock
broker shall be satisfied after excluding account of the SBU.
5. As the activities of the SBU shall be under the jurisdiction of another regulatory
authority, Grievance Redressal Mechanism and Investor Protection Fund (IPF) of
the stock exchanges and SCORES shall not be available for investors availing the
services of the SBU.
6. This circular is issued in exercise of powers conferred under Section 11(1) of
Chapter IV of the Securities and Exchange Board of India Act, 1992, read with
regulation 30 of the SEBI (Stock Brokers) Regulations 1992 to protect the interests
of investors in securities and to promote the development of, and to regulate the
securities markets.
7. This circular is available on SEBI website at www.sebi.gov.in under the category:
‘Legal → Circulars’.
Yours faithfully,
Aradhana Verma
General Manager
Tel. No.: 022-26449633
E-mail: aradhanad@sebi.gov.in
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