Securities and Exchange Board of India (SEBI) has issued a circular facilitating SEBI-registered stock brokers’ access to the Negotiated Dealing System-Order Matching (NDS-OM) for trading in Government Securities (G-Secs). This initiative follows the Reserve Bank of India’s notification permitting non-bank brokers to use NDS-OM under specific access criteria. To streamline this process, SEBI requires stock brokers to conduct NDS-OM trading through Separate Business Units (SBUs) within their entities. These SBUs must operate independently from the securities market activities of the parent stock brokerage firm, with separate accounts and segregated net worth to ensure compliance and mitigate risks.
Key safeguards include maintaining an arm’s-length relationship between the SBU and other broker activities, ensuring SBUs exclusively handle NDS-OM transactions, and excluding SBUs from the Investor Protection Fund and SEBI’s SCORES grievance redressal mechanism. The regulatory framework for SBUs will fall under the jurisdiction of respective authorities, addressing matters such as eligibility, risk management, and investor grievances. This circular, issued under Section 11(1) of the SEBI Act, 1992, aims to promote structured and secure participation in the G-Secs market while protecting investors and maintaining market integrity. Full details are accessible on the SEBI website.
Securities and Exchange Board of India
Circular No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/14 Dated: February 11, 2025
To,
All recognized Stock Exchanges
Stock Brokers through Recognized Stock Exchanges
Dear Madam / Sir,
Sub: Facilitation to SEBI registered Stock Brokers to access Negotiated Dealing System-Order Matching (NDS-OM) for trading in Government Securities- Separate Business Units (SBU)
1. Reserve Bank of India vide its notification dated February 07, 2025 permitted access of SEBI-registered non-bank brokers to Negotiated Dealing System-Order Matching (NDS-OM) through Master Direction – Reserve Bank of India (Access Criteria for NDS-OM) Directions, 2025.
2. In order to facilitate SEBI-registered stock brokers to participate in Government Securities (G-Secs) market in the NDS-OM, it has been decided that they may do so under a Separate Business Unit (SBU) of the stock broking entity itself, in the manner specified herewith.
3. 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 broker facilitating trading on NDS-OM would be under the jurisdiction of that regulatory authority.
4. In pursuance of the above regulatory jurisdiction, to demarcate the regulatory obligations and to ring fence the activities of the stock brokers and its NDS-OM activities, some of the key safeguards are being prescribed as under:
3.1 Stock brokers shall ensure that activities of the NDS-OM under a SBU are segregated and ring-fenced from the securities market related activities of the stock broker and arms-length relationship between these activities are maintained;
3.2 Such SBU shall be exclusively engaged in activities of transacting on NDS-OM only;
3.3 Stock brokers shall prepare and maintain a separate account for the SBU on arms-length basis;
3.4 The net worth of the SBU shall be kept segregated from the net worth of the stock broker in the securities market. Net worth criteria for stock broker shall be satisfied after excluding account of the SBU.
5. As the activities of the SBU shall be under the jurisdiction of another regulatory authority, Grievance Redressal Mechanism and Investor Protection Fund (IPF) of the stock exchanges and SCORES shall not be available for investors availing the services of the SBU.
6. This circular is issued in exercise of powers conferred under Section 11(1) of Chapter IV of the Securities and Exchange Board of India Act, 1992, read with regulation 30 of the SEBI (Stock Brokers) Regulations 1992 to protect the interests of investors in securities and to promote the development of, and to regulate the securities markets.
7. This circular is available on SEBI website at sebi.gov.in under the category: ‘Legal → Circulars’.
Yours faithfully,
Aradhana Verma
General Manager
Tel. No.: 022-26449633
E-mail: aradhanad@sebi.gov.in
