Expansion of NDS-OM Platform to Non-Bank Brokers

Current Affairs National

Posted by newadmin on 2025-02-10 09:01:05 |

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The Reserve Bank of India (RBI) recently introduced a policy change allowing non-bank brokers registered with the Securities and Exchange Board of India (SEBI) to access the Negotiated Dealing System-Order Matching (NDS-OM) platform. This initiative is aimed at increasing retail participation in government securities trading by enhancing liquidity and accessibility for individual investors in the financial market.

The NDS-OM platform, managed by the RBI, serves as an electronic trading system for secondary market transactions in government securities. Since its introduction in August 2005, it has replaced inefficient telephone-based trading with a more transparent and efficient mechanism. The platform allows members to place bids and offers anonymously, ensuring better price discovery and market efficiency.

Until now, participation in the NDS-OM platform was restricted to banks, primary dealers, insurance companies, and mutual funds, all of which maintain Subsidiary General Ledger (SGL) accounts with the RBI. However, the new policy will enable eligible stock brokers to apply for membership, thereby allowing them to facilitate government securities trading for their individual clients. This expansion is expected to significantly boost retail investor participation by making it easier for individuals to buy and sell government securities.

By granting stock brokers access to the platform, the RBI aims to improve market liquidity, enabling retail investors to enter and exit positions more efficiently. This move is anticipated to generate greater interest from retail participants, especially if brokers integrate their trading platforms with NDS-OM to offer seamless access.

To ensure regulatory compliance, SEBI released a consultation paper in October 2024 outlining a framework for stock brokers engaging in government securities trading. Under this framework, brokers must establish a separate business unit dedicated to these activities, maintaining an arm’s-length relationship with their other operations. Additionally, they are required to set up agreements with members of the Clearing Corporation of India Ltd. (CCIL) for transaction settlements.

The CCIL plays a crucial role in ensuring the smooth settlement of trades executed through the NDS-OM platform. By modernizing trade processing and reducing reliance on paper-based methods, the CCIL enhances the efficiency and integrity of the trading system.

The inclusion of non-bank brokers in the NDS-OM platform represents a step forward in modernizing India’s financial markets. As retail participation in government securities trading increases, the market is expected to become more dynamic and competitive. With ongoing technological advancements, trading processes will likely continue to evolve, further strengthening the accessibility and efficiency of government securities trading in India.

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