The Securities and Exchange Board of India (Sebi) on Wednesday increased the minimum capital deposit required to be maintained by a stockbroker to up to R50 lakh, from a maximum of R10 lakh earlier, to safeguard against any risks posed by them to the overall market.
The Base Minimum Capital (BMC) is the deposit maintained by the member of a stock exchange against which no exposure for trades is allowed and these deposits were last hiked by Sebi nearly 16 years ago in 1996.
These are meant for meeting contingencies in any segment of the exchange and are commensurate with the risks that the broker may bring to the system.
Announcing the increase and other changes in the BMC requirements, which would be implemented by March 31, 2013, Sebi said the market structure has undergone significant structural changes over the years.
“The various technological changes and the increased speeds of trading have brought to fore the greater quantum of risks arising during the course of execution of transactions.
“Hence, based on deliberations at various forums, it has been decided to review and enhance the BMC requirement,” it said. As per the revised BMC framework, it would be enhanced for members holding registration as ‘stockbroker’ in the cash segment, while BMC would also be introduced for members holding registration as ‘trading member’ in any derivative segment.
Sebi has proposed a higher BMC requirement for those using high-frequency algorithmic trading facilities, while the deposits would be comparatively lower for the trading members indulging in only proprietary trading.
The new BMC deposit requirements, as per the profile of the members, range from R10 lakh to R50 lakh for members of stock exchanges having nationwide trading terminals, while for members of other stock exchanges, it would be 40% of the same.