The Securities and Exchange Board of India (SEBI) has issued a circular to stock brokers, trading members, and depository participants (DPs) to enhance the monitoring of broking houses. Around 15-16 of the largest broking firms would be designated as Qualified Stock Brokers (QSBs); firms like Zerodha, Groww, ICICI Securities, 5Paisa, and Motilal Oswal Financial Services among others could fall under the new category
The decision by the capital markets regulator could see leading brokerages like Zerodha, Groww, Angel One, RKSV Securities, ICICI Securities, 5Paisa, HDFC Securities, Kotak Securities, Motilal Oswal Financial Services and IIFL Securities among others coming under the new category. These are the top 10 broking houses in terms of the number of active clients, as per data from the National Stock Exchange for the month of November.
“In order to address the concentration risk, which exists in our markets today… the top 10-12 brokers will account for a very large percentage of the market volumes. So, in order to mitigate the concentration risk, what is proposed is that on the basis of some very transparent criteria, certain brokers will be recognized or precise as Qualified Stock Brokers,” stated Sebi chairperson Madhabi Puri Buch on Tuesday while addressing the media after a board meeting of the watchdog.
SEBI has announced its intention to enhance the monitoring of stock broking houses in order to ensure that they comply with the regulations and guidelines set out by the regulator.
The new reporting requirement is expected to lead to increased transparency in the industry and will help in strengthening the monitoring system in the country. It is also expected to help in curbing market manipulation and insider trading activities by allowing exchanges and SEBI to keep a close watch on the operations of the brokers. The reporting requirement is also likely to bring down operational costs for the brokers as they will be able to manage their business more efficiently and accurately.
As per data from Sebi, more than 80 percent of the trading turnover on BSE in the month of November was from the top 25 brokerages. For NSE, the share was pegged at a little over 72 percent. If one takes into account the top 100 brokerages, then nearly 90 percent of the turnover on BSE and NSE is accounted for by these broking entities.
To mitigate this threat, the Board accredited amendments to the SEBI (Stock Brokers) Regulations, 1992 to designate such inventory brokers, primarily based totally on diagnosed parameters, as Qualified Stock Brokers (QSBs). QSBs could want to conform with improved threat control practices/requirements. There could additionally be improved tracking of such QSBs with the aid of using SEBI/Market Infrastructure Institutions (MIIs),” it, in addition, stated, while highlighting the reality that an in-depth framework on QSBs will be issued one by one with the aid of using manner of a circular.