Zerodha founder and CEO Nitin Kamath on Tuesday took to Twitter to share the impact of a new regulation by the Securities and Exchange Board of India (SEBI) on segregation of customer collateral and its impact on the broking industry.
Nitin Kamato shared on Twitter that, “From May 2, brokers will have to liquidate collateral at the client level. Therefore funds from one client cannot be used to fund another client. This is a significant regulatory change that makes our markets even more secure. India is one of the few in the world to do so.”
Following this regulation, “broker’s capital will be blocked if they allow clients to sell stock without any funds in the account, to trade more of the credit from the sale, use 100% of the funds, and more.” Essentially increasing the working capital requirement of the brokerage firm,” Kamath shared.
However, he informed that, “nothing changes”. @zerodhaonlineHowever, this can happen after July 31 in brokerage firms that are not well capitalized in comparison to the size of their business. We are currently in a transition period of 3 months to the new rules where there is no penalty.”
Meanwhile, markets regulator SEBI on Monday asked stock exchanges and other market infrastructure institutions (MIIs) to submit information related to exceptionally major non-compliances found in system and network audits.
The System and Network Audit Report will be placed before the Governing Board of the respective MII. Subsequently, the report along with the comments of the management of the MII needs to be reported to SEBI within one month of the completion of the audit, according to a circular.
Keeping in view the rapid technological developments in the securities market and the potential risks to the efficiency and integrity of the markets from these developments, SEBI in January 2020 mandated that an annual system audit be conducted by stock exchanges, clearing corporations and depositories. needed. A reputed independent auditor.