Mumbai: BSE has extended the direct market access facility to foreign portfolio investors (FPIs) which allows them to access the stock exchange’s trading system without any manual intervention by any broker. “Exchange specifies that DMA facility can be extended to the… FPI investors,” BSE said in a circular.
As per BSE, all provisions of the stock exchange in respect of DMA facility would be applicable to the FPIs. The bourse would provide the direct market access facility (DMA) facility across all FPI categories. FPIs have been divided into three categories as per their risk profile. Category I includes government and government-related investors such as central banks, governmental agencies, sovereign wealth funds and international or multilateral organisations or agencies.
Category II FPI includes appropriately regulated broad-based funds such as mutual funds, investment trusts, insurance/reinsurance companies, regulated persons such as banks, asset management companies, investment managers advisors, portfolio managers,
Besides, this category includes broad-based funds that are not appropriately regulated but whose investment manager is appropriately regulated, university funds and pension funds as well as university related endowments already registered with the board as FPI or sub-accounts.
Category III class of FPI are all other entities not eligible under Category I and II such as endowments, charitable societies, charitable trusts, foundations, corporate bodies, trusts, individuals and family offices. Securities and Exchange Board of India (Sebi) had in 2012 streamlined the DMA facility.
As per the regulator’s norms, investors seeking to avail DMA facility would not have to enter into a separate ‘broker- client agreement’ and it would be replaced by a simpler ‘terms and conditions’ document. However, the brokers have to specifically authorise clients or investment managers acting on behalf of the clients for providing DMA facility, after fulfilling Know Your Client requirements and carrying out necessary due diligence.
The broker would have to maintain proper records of such due diligence procedures. Some of the benefits of DMA facility include direct control of clients over orders, faster execution of their orders, reduced risk of errors associated with manual order entry and lower transaction costs.