Sebi eyes blocked funds route for secondary market
Mumbai, Sep 22, 2022
Sebi is working on a system to introduce a process similar to Application Supported by Blocked Amount (ASBA) for secondary market transactions. This was revealed by the markets regulator's chairperson Madhabi Puri Buch said on Wednesday.
ASBA is a process through which an investor can bid in an IPO after his bank blocks funds equivalent to the value of the bid. But under this system, the funds are not transferred to the IPO fund.
If shares are allotted to the investor, the bank transfers the money to the IPO fund, else the blocked funds are released. This makes the system less risky and investors also do not lose out on interest on the money in the bank account till actual share allotment happens.
"So, if that can be done for the primary market, why can't it be done for the secondary market?" Buch said, pointing out that the regulator was now actively engaged in looking at this option. She was speaking at the Global Fintech Fest in the city. According to the Sebi chief, a process like ASBA for the secondary market is aimed at reducing "structural vulnerabilities" in the system.
Market players said that such a system could hasten the process of T+1 settlement. A T+1 settlement system is where the trades in the market are settled the next working day with stocks bought credited to the investors' demat account, while funds are credited to the sellers' bank account. At present, most of the trades are done on a T+2 basis.
The Sebi chief also said that fintechs should not try to operate in an opaque manner nor put in barriers for investors to exit. If such things happen, Sebi would step in to correct such market anomalies, she warned.
"If your business model is such that it is going to increase concentration risk or structural vulnerability, chances are that sooner or later (Sebi) will move to eliminate (those issues)," she said. She also said that Sebi will not allow any business model that relies on a black box not open to sunlight, where its offering or claims cannot be audited or validated. The regulator would insist on transparency and sufficient disclosure from companies, and then leave it to the individual investors to decide, the Sebi chief said.
Buch also asked startups to build their services on public infrastructure like Aadhaar and make best use of them to build business models, which would be helpful.
[The Times of India]