SEBI Proposes Mandatory UPI Block Mechanism Facility For Secondary Market Trading

Markets regulator Sebi on Wednesday proposed that qualified stock brokers (QSBs) mandatorily offer a facility for trading in the secondary market, using the UPI block mechanism, similar to the ASBA facility.

Additionally, feedback has been sought on whether QSBs can offer a "3-in-1 trading account facility" as an alternative to making the ASBA-like facility mandatory, according to a consultation paper.

Application Supported by Blocked Amount (ASBA) facility allows trading with blocked amounts and is currently optional for trading members.

It provides enhanced protection to the client's funds and securities.

In the primary market, the facility ensures that money from an investor gets moved only when the allotment is completed.

Trading members are classified as qualified stock brokers based on factors like the size and scale of their operations, including the number of active clients, the total assets held by clients with the TM, the end-of-day margin of all clients, and the trading volume of the TM.

Being designated as a QSB brings with it enhanced responsibilities and obligations.

The Securities and Exchange Board of India (Sebi) sought public comments till September 12 on the proposals.

The regulator had introduced the use of RBI-approved Unified Payments Interface (UPI) with the facility of blocking of funds, as a payment mechanism for retail Investor applications submitted through intermediaries for public issues (IPO) from January 2019.

In January 2024, Sebi introduced a supplementary mechanism for trading in secondary markets by integrating the UPI service of a single block and multiple debits.