SEBI hikes base minimum capital for stockbrokers to Rs50 lakh

The Securities and Exchange Board of India (SEBI) today announced an increase in the base minimum capital (BMC) requirement of a stock broker to a maximum Rs50 lakh from the current Rs10 lakh, in a bid to safeguard against any risks posed by them.

The base minimum capital is the deposit given by the member of the exchange against which no exposure for trades is allowed.

The deposits 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, SEBI said in a release.

''Over the years the market structure has undergone significant structural changes and 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. In light of this, based on deliberations at various forums, it has been decided to realign the BMC requirements with the risk profiles of the stock brokers / trading members in cash / derivative segment of the stock exchange,'' SEBI said.

Accordingly, the requirement of BMC would be enhanced for members holding registration as `stock-broker' in cash segment and for `trading members' holding registration in the derivative segment.

New Base Minimum Capital rates:

• Only proprietary trading without algorithmic trading (Algo) - Rs10 lakh.
  
• Trading only on behalf of client (without proprietary trading) and without Algo - Rs15 lakh.
  
• Proprietary trading and trading on behalf of client without Algo - Rs25 lakh.
  
• All trading members/brokers with Algo - Rs50 lakh.

A scenario may arise, wherein, a member has registration as a `stock broker' as well as a `trading member' and is engaged as a principal doing proprietary trading on cash segment and is also engaged as an agent and transacting only on behalf of the clients in the derivatives segment.

Further, the member may not have availed facility for algorithmic trading. In such a case, the profile of such a member will be assessed as `proprietary trading and trading on behalf of client without Algo'. The applicable BMC deposit for such a member will be Rs25 lakh.

This BMC deposit requirement is applicable to all stock brokers / trading members of exchanges having nation-wide trading terminals, SEBI said.

For stock brokers / trading members not having nation-wide trading terminals, the deposit requirement will be 40 per cent of the above said BMC deposit requirements.

The BMC deposit should be maintained for meeting contingencies in any segment of the exchange. For members having registration for more than one segment of the same exchange, the BMC deposit requirement will be the highest applicable BMC deposit, across various segments.

No exposure will be granted against such BMC deposit. The stock exchanges will be permitted to prescribe suitable deposit requirements over and above the SEBI-prescribed norms, based on their perception and evaluation of risks involved.

Minimum 50 per cent of the deposit should be in the form of cash and cash equivalents. The existing guidelines on collateral composition will continue to remain applicable.

All other relevant provisions shall continue to remain applicable.

SEBI has directed stock exchanges to make necessary amendments to the relevant bye-laws, rules and regulations for the implementation of the new BMC norms.