The Securities and Trade Board of India (Sebi) on Monday mandated all certified stockbrokers to supply their purchasers with a unified funds interface (UPI) for blocking funds or a 3-in-1 buying and selling system to commerce within the secondary markets.
From 1 February 2025, all certified stockbrokers should supply both the UPI-blocked buying and selling facility or the built-in 3-in-1 buying and selling account.
A UPI block mechanism allows buyers to put aside funds of their financial institution accounts for inventory buying and selling, relatively than transferring the funds to a buying and selling member. Launched by Sebi in January 2019, this UPI block mechanism initially served as a cost technique for retail buyers collaborating in public share points within the major markets. Following its profitable implementation, Sebi expanded its use to secondary markets in January this yr. A beta model of this mechanism was rolled out for particular person buyers and Hindu Undivided Households (HUFs), relevant solely to the money buying and selling phase. At the moment, using this mechanism is non-obligatory for buying and selling members.
The three-in-1 account facility, which some brokers already supply, combines an investor’s buying and selling, demat, and financial institution accounts into one built-in platform. This method mechanically blocks the required funds for purchase orders and blocks securities within the demat account for promote orders, guaranteeing larger comfort and management for buyers. If the commerce is just not executed, the funds and securities are promptly launched.
What Sebi goals for
Sebi’s UPI-based fund blocking mechanism goals to mitigate dangers related to defaults by buying and selling members and clearing members. This initiative, outlined in Sebi’s Grasp Round dated 16 October 2023, is designed to supply enhanced safety for money collateral available in the market.
Anirudh Garg, accomplice and fund supervisor at Invasset PMS, stated the round is of nice significance because it offers buyers extra management over their funds and is essential for decreasing dangers related to counterparty defaults. “Blocking of funds or securities in consumer accounts implies that relating to uninterrupted buying and selling, there are investments which might by no means be misplaced. As well as, there are additionally different options accessible as a result of buyers could select to go for the previous approach of doing issues or the brand new amenities which have been launched” he stated.
Garg believes that each direct and oblique measures might result in a rise in confidence and participation from low-risk buyers. “Additionally, the compulsory software of this method by 2025 is an excellent advance in the direction of defending the buyers,” he stated.
