ASBA for secondary market in the works: Sebi chairperson Madhabi Puri Buch

Regulator not against algo trading but businesses 'cannot be a black box', she says

The Securities and Exchange Board of India (Sebi) is considering an ASBA-like structure for the secondary market, said the regulator’s chairperson, Madhabi Puri Buch, on Wednesday, referring to an application process for IPOs.

With Application Supported by Blocked Amount, money from an applicant's account is deducted on allocation of IPO. The process facilitates investors bidding with multiple options to apply through self-certified syndicate banks (SCSBs) where they have accounts.

An instrument for the secondary market will remove structural vulnerabilities, said Buch at the Global Fintech Fest in Mumbai.

Sebi is not against algo trading, but certain principles must be followed to makes the process transparent. ”If algos claim they can deliver 350 per cent return, they must be able to simulate it in an independent arrangement so that Sebi can validate. It cannot be a black box not open to sunlight to sanitise it."

Elaborating on how the Sebi is working to narrow down the regulatory gap, Buch shared principles that could help fintech entities get regulatory go ahead.

Buch said financial technology companies (fintech) must not play on anonymity and nor they build barriers for investors or customers, she said.