‘Brokers should separate trading, clearing arms in cash market too’

Chennai | Updated on January 11, 2019 Published on January 11, 2019

Brokers who fail to meet the requirement have to tie up with a clearing member or professional clearing member   -  AFP

Norm will be effective from April 1: SEBI

From April 1, the membership structure applicable in the equity derivatives segment would be implemented in the cash segment too, market regulator SEBI said in a circular on Friday.

That means, brokers have to separate the trading and clearing activities as distinct entities in the cash segment too.

Stock brokers already registered as self-clearing members in the cash segment or as clearing members in the derivatives segment would automatically have the same status in the cash segment too, from April 1.

“Unification of membership structure across equity cash and derivatives segments of stock exchanges is vital to facilitate ease of doing business,” the circular said.

Currently, brokers in the cash segment act as both trading as well as self-clearing members but in the derivatives segment they are separate entities.

Stock brokers, who are yet to register as self-clearing members or clearing members in the derivatives segment, can discharge the same work in the cash segment, provided such brokers comply with the net worth requirement by September 30, the circular added.

Those failing to meet the requirement would continue as a trading member in the cash segment. However, they have to tie up with a clearing member or professional clearing member (PCM) on or before September 30 to clear and settle their trades, SEBI said.

“The existing PCMs in the derivatives segment will become PCMs in the cash segment with effect from April 1,” it said. However, the existing custodian clearing member in the cash segment should continue to act as custodian clearing member in cash segment only.

It may be recalled that in June 2018, the SEBI board had decided to do away with the category of sub-brokers as market intermediaries.

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Published on January 11, 2019
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