SEBI panel suggests improving block deal, client fund transfer

SEBI’s advisory panel on Monday suggested ways to make the ‘block deal’ window efficient and held extensive discussions on direct transfer of funds/securities to client accounts. The secondary market advisory committee (SMAC) held its meeting in Mumbai.

A panel member raised the point of trade time extension beyond 3.30 but not much was discussed about it, two sources told BusinessLine .

Improving the block deal structure is a long-standing demand. Currently, block deal for maximum of ₹5 crore via a single transaction in the first 35 minutes of trade is allowed. The transaction price of a share ranges from +1 to -1 per cent of the previous day’s closing or current market price. These transactions take place on delivery basis.

Usually block deals take place at an agreed price by the parties. In a letter to SEBI, Asia Securities Industry & Financial Markets Association (ASIFMA), a body representing FPIs had sought extension of the ‘time window’ for block deals. The letter cited global practices for relaxed block deals.

“The SEBI panel suggested introducing one more block deal window during market hours,” the source present in the meeting said. “Also, it was agreed by most members that direct transfer of funds to client accounts by clearing houses should be the way forward.”

Stock exchanges have received several complaints from clients against brokers for fund siphoning. Bad business practice by Kassa Finvest, Unicorn and Amrapali, among others, have been recent cases where client funds was diverted. BusinessLine had reported on Monday that SEBI believes brokers should not be allowed to handle client funds, to avoid frauds.

The SMAC meeting lasted for around two hours. Position limit for securities lending and borrowing, extension of facility of one hour call auction framework, code of conduct for index providers, and framework for dividend adjustment of stock futures were among the six agenda items discussed by the panel.

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