SEBI opens doors for stockbrokers in government securities market via separate business units

SEBI has allowed stockbrokers to directly participate in the government securities (G-Secs) market through a separate business unit (SBU). This move follows the Reserve Bank of India’s February 7 notification permitting SEBI-registered non-bank brokers to access the Negotiated Dealing System-Order Matching (NDS-OM) platform under the 'Master Direction - Reserve Bank of India (Access Criteria for NDS-OM) Directions, 2025'.  

The new framework requires stockbrokers to operate their G-Sec trading activities under an independent SBU within the broking entity. SEBI’s circular outlines the operational guidelines, including eligibility, risk management, investor grievance handling, and enforcement mechanisms.  

To ensure a clear demarcation between regular stockbroking and NDS-OM activities, SEBI has prescribed several safeguards:  

• The SBU must maintain a separate account and operate at arm’s length from the core securities market activities of the stockbroker.  
• Its net worth must be segregated from that of the parent stockbroking entity.  
• The SBU will exclusively handle transactions on NDS-OM.  

Since the SBU falls under a different regulatory jurisdiction, investor protection mechanisms such as the Securities and Exchange Board of India (SEBI's) SCORES platform, stock exchange grievance redressal systems, and Investor Protection Fund (IPF) will not be applicable for investors using SBU services.  

This circular is issued under Section 11(1) of Chapter IV of the SEBI Act, 1992, and Regulation 30 of SEBI (Stock Brokers) Regulations, 1992, with a focus on investor protection and market development.  

Vishal Goenka, Co-Founder of IndiaBonds.com, welcomed SEBI’s decision, calling it a pivotal move to democratize the government securities market. He stated, “SEBI's recent decision to permit registered stockbrokers to access the Negotiated Dealing System-Order Matching (NDS-OM) platform through Separate Business Units (SBUs) is a significant step towards democratizing the Government securities market. Historically, access to NDS-OM was limited to entities like banks and mutual funds, creating barriers for retail investors. This move aligns with the Reserve Bank of India's initiative to broaden market participation.”