Stock brokers will offer UPI-based fund blocking or 3-in-1 accounts to investors from February 1

New Delhi, From February 1, eligible stockbrokers will have to either facilitate their clients to trade in the secondary market using the UPI-based block mechanism, similar to the ASBA facility, or the three-in-one trading account facility. , a move that will empower investors. Qualified Stock Brokers (QSBs) must offer one of these two options, in addition to the current mode of trading.

A three-in-one trading account combines savings account, demat account and trading account into one integrated solution. In this case, customers will have their funds in their bank accounts, earning interest on the cash balance.

“This initiative will empower and benefit investors with enhanced security, improved transparency, interest earning and ease of payment at a time when UPI payments are witnessing significant growth,” said Rahul Jain, CFO, NTT Data Payment Services India.

Further, the move will improve fund management and further increase the convenience of investors by allowing them to block funds for trading and create payment orders that will protect their funds from misuse, he added.

On Monday, SEBI’s board approved a proposal in which, in addition to the existing mode of trading, QSBs will either facilitate trading supported by blocked amounts in the secondary market (cash segment) using the UPI block mechanism (an ASBA-like facility). Secondary Market) or 3-in-1 trading account facility, effective February 1, 2025.

In the UPI block mechanism, clients can trade in the secondary market based on funds blocked in their bank account instead of transferring funds up front to a trading member.

Customers of QSB will have the option to continue with the existing facility of trading or opt for a new facility by transferring funds to trading members.

Trading Members (TMs) are classified as QSBs based on factors such as the size and scale of their operations, including the number of active clients, total assets of clients with TMs, end-of-day margins of all clients. and TM’s trading volume.

Being designated as a QSB, brings with it enhanced responsibilities and accountabilities. In addition, QSBs are also subject to enhanced supervision by market structure bodies.

The market regulator introduced the use of RBI-approved Unified Payments Interface (UPI) with the facility of blocking funds as a payment method for retail investor applications submitted by intermediaries for public issues such as IPOs from January 2019.

The beta version of trading through the block mechanism for the secondary market was launched on January 1, 2024 for individuals and HUFs and was applicable to the cash segment only.

Currently, the facility is optional for investors, and not mandatory for trading members to serve clients.