ASBA-Like Facility For Stock Trading From Jan. 1: All You Need To Know

The market regulator has allowed an ASBA-like feature, which blocks funds in investor accounts instead of transferring them to the broker account, to enhance protection of investor money.

This facility, similar to application supported by blocked amount for investments in IPO, will be available to buy shares via the Unified Payments Interface or UPI. The feature is optional.

Investors, starting Jan. 1, can choose to block a pre-decided amount via UPI facility on a broker's app or platform. Funds will be debited and released to the clearing corporation for the settlement of each trade separately.

As of now, investors have to deposit funds with the broker for settlement.

The unused amount under the ASBA-like facility will be available for the investor to use. Currently, such funds lie with brokers till trade or end of the week.

The facility also allows the blocked amount to be considered as collateral for trade.

All investors who are permitted to use RBI’s UPI facility and meet the criteria defined by the clearing corporations will be eligible.

The new payment mechanism comes after SEBI found instances of brokers misusing client funds for their own use.

• The facility to block funds is optional for investors.

• It will be provided by the stockbroker. 

• An investor can choose to opt for the facility via UPI for an account with one broker, while continuing with the existing payment outside UPI mechanism with another.

Once an investor opts for the facility with any broker:

1. The broker will share an investor's account details with the exchanges.

2. BSE and NSE will share the relevant investor account data with clearing corporations. 

3. A maximum of Rs 5 lakh can be blocked by one investor, as per UPI guidelines.

4. All cash collaterals will be provided through the UPI facility.

5. Bank guarantees and fixed deposits are not accepted as collateral.

6. Securities offered as collateral by an investor for trading will be provided through the pledge/repledge system—where shares in demat form are pledged and not transferred to the broker's account. Only securities in the approved list of the clearing corporation can be provided.

7. The payment for shares bought can only be made through money blocked via UPI.

8. Collateral and settlement will continue segmentwise for cash and F&O markets. Investor or broker or clearing member will need to transfer or reallocate collateral between segments.  

9. Running account settlement will not be supported.   

10. Clearing corporation will settle trades only via blocked funds on a daily basis.