At present, the NDS-OM system is open to membership for entities like banks, primary dealers, insurance companies, mutual funds, etc., that maintain Subsidiary General Ledger (SGL) accounts with the RBI.

“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 brokers facilitating trading on NDS-OM would be under the jurisdiction of that regulatory authority,” the consultation paper states.

The market regulator has proposed measures to ring-fence the activities of stock brokers from those of NDS-OM.

Stock brokers will have to prepare and maintain a separate account for the SBU on an arm’s-length basis, and the net worth will be considered separately.

“Stock brokers shall ensure that activities of the NDS-OM under an SBU are segregated and ring-fenced from the securities market-related activities of the stock broker, and an arm’s-length relationship between these activities is maintained,” said Sebi in the draft circular.

The market regulator has added that, as the activities of this separate unit will be under the jurisdiction of another regulatory authority, the grievance redressal mechanism and investor protection fund of the stock exchanges will not be available to investors availing this service.

Sebi has sought public comments on the proposals by October 25.

First Published: Oct 04 2024 | 7:36 PM IST