SEBI unveils ASBA-like facility for trading in secondary market

SEBI unveils ASBA-like facility for trading in secondary market

Subject : Economy

Section: Capital Market

Key points:

• SEBI has introduced a ASBA (Application supported by Blocked Amount)-like process for trading in the secondary market.
• At present money has to be transferred to the trading account before executing any trade. With this system funds can be blocked in the investor’s bank account itself.
• This will help protect the cash collateral needed to be parked with
• It has been built by integrating the Unified Payments Interface (UPI) mandate service of single-block-and-multiple-debits with the secondary market trading and settlement process and ‘UPI block facility’.
• Funds will remain in the bank account of the client but will be blocked in favour of the clearing corporation (CC) till the block is released by the CC (either through debit on execution of trade or by request from client for unblock)
• Details of operations:
  • The settlement for funds and securities will be done by the CC without the need for handling of client funds and securities by the member (member is the broker that the individual investor is using).
  • UPI block will be treated as collateral, and will also be used for settlement purposes.
  • A Block can be debited multiple times, subject to available balance, for settlement obligations across days.
  • An investor will have an option to either use UPI block on a broking account or use bank account. Different methods can be used for each broking account.
  • Single block limit of ₹5 lakh will apply, even while multiple blocks can co-exist subject to the overall limit applicable in UPI.