Brokers to offer UPI-based trading or 3-in-1 account to investors by Feb 1
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Market regulator Securities and Exchange Board of India (Sebi) has introduced new requirements for qualified stock brokers (QSBs) to offer either a UPI-based block mechanism or a three-in-one trading account facility to their clients from 1 February, 2025. This move aims to enhance investor convenience and provide more options for trading in the secondary market.
QSBs must choose between offering the UPI-based block mechanism or the three-in-one trading account facility to their clients.
Similar to the ASBA (Application Supported by Blocked Funds) facility, this mechanism allows investors to block funds in their bank accounts for share purchases.
A three-in-one account combines a savings account, demat account, and trading account, providing a more integrated solution for investors.
Clients of QSBs will have the option to choose between the existing trading facility or the new UPI-based block mechanism or three-in-one account.
QSB Eligibility: QSBs must meet specific criteria based on their size, scale of operations, and other factors.
QSBs are subject to increased oversight and monitoring.
Currently, offering the UPI-based block mechanism is optional for brokers.
"This initiative will empower and benefit investors with enhanced security, improved transparency, interest earnings and ease of making payments at a time when UPI payments are witnessing significant growth," said Rahul Jain, CFO, NTT DATA Payment Services India.
Additionally, the move will improve fund management and further enhance investors' convenience, allowing them to create a payment mandate by blocking funds for trading which will safeguard their amount from misuse, he added.
On Monday, Sebi's board approved a proposal whereby, in addition to the current mode of trading, the QSBs shall provide either the facility of trading supported by blocked amount in the secondary market (cash segment) using UPI block mechanism (ASBA-like facility for the secondary market) or the 3-in-1 trading account facility, with effect from February 1, 2025.
In the UPI block mechanism, clients can trade in the secondary market based on blocked funds in their bank accounts, instead of transferring the funds upfront to the trading member.
Clients of the QSBs will have the option, to either continue with the existing facility of trading by transferring funds to trading members or opt for the new facility.
Trading members (TM) are classified as QSBs based on factors such as 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.
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