The Securities and Exchange Board of India has approved a broad framework for a facility similar to Application Supported by Blocked Amount for trading in the secondary markets.
ASBA is an application made by an investor to block funds available in the applicant's savings bank account or current account for subscribing to an issue of stock. Under ASBA, an investor's money is debited from their bank account only if their application is selected for allotment, after the basis of allotment is finalised or the issue is withdrawn or it fails.
The facility will be optional for both investors and stockbrokers, SEBI said in a statement on Wednesday.
Such a facility for trading in secondary markets will be made available via UPI, the market regulator said.
Investors will also continue to earn interest on their blocked funds in their savings accounts under this facility.
According to SEBI, the introduction of such a framework will have the following key benefits:
Direct settlement through the clearing corporation without passing through a pool account of intermediaries.
Elimination of custody risk of client collateral.
No adverse impact on client pay-out, even in case of member or fellow client's default.
Furthering efficiency in secondary markets by allowing usage of same blocked funds for margin and settlement obligations.
"Under the proposed framework, stockbrokers will be allowed to either directly settle the brokerage with the UPI clients or opt for CC's facility to deduct standard rate of brokerage from the UPI block of the clients," the statement said.
The ASBA-like facility for secondary market trading will be implemented in a phased manner.
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