The Securities and Exchange Board of India (SEBI) has assured stockbrokers that it will review concerns regarding the Reserve Bank of India’s new funding norms. Brokers warn the rules, requiring higher collateral for proprietary trading, could hurt liquidity and raise costs. SEBI may engage with RBI for calibrated solutions.
The Securities and Exchange Board of India (SEBI) has announced that it will look into representations made by stockbrokers over the Reserve Bank of India’s (RBI) new funding norms. The RBI’s directives, set to take effect from April 1, mandate banks to tighten funding to proprietary traders under capital market exposure rules, raising collateral requirements and potentially impacting liquidity.
Key Highlights
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SEBI chief confirmed review of brokers’ concerns regarding RBI’s new funding norms
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RBI rules require banks to increase collateral backing for guarantees to proprietary trading desks
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Brokers warn the move could disrupt liquidity, raise funding costs, and affect trading volumes
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Industry bodies like ANMI have sought deferment of the norms, citing risks to price discovery
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Joint consultations between RBI, SEBI, and broker associations are being considered for resolution
Strategic Impact
The new norms are intended to strengthen financial stability and reduce systemic risks in capital markets. However, brokers argue that sudden implementation could hurt domestic trading firms, reduce competitiveness against foreign players, and disrupt market liquidity.
SEBI’s intervention signals a willingness to balance regulatory prudence with market realities. Analysts believe a calibrated approach, possibly involving phased implementation or modified collateral requirements, could help safeguard both investor confidence and market efficiency.
Sources: Economic Times, Reuters, Business Standard