Sebi relief to regional bourse brokers soon

The Securities and Exchange Board of India will shortly notify special amendments to the stock brokers and sub-brokers regulation in order to provide a special window to subsidiaries of stock exchanges who are registered as stock brokers, and their registered sub-brokers.

This move comes as a relief to brokers of smaller regional exchanges who have been protesting against the Sebi directive of September 2004 which effectively barred sub-brokers from issuing contract notes.

Now even as the new model tripartite agreement between the broker, sub-broker and the investor comes into force from April 1, 2005, Sebi has held out a ray of hope for brokers of smaller exchanges.

V Shankar, managing director of the Interconnected Stock Exchange, whose subsidiary is a member of the National Stock Exchange and the Bombay Stock Exchange, said the Sebi move will help extend the distribution channel for stock broking services through the exchange subsidiaries in a structured and institutional form.

The brokers of smaller exchanges raised the issue because the smaller exchanges had floated subsidiaries that were broker-members of bigger exchanges.

Thus, brokers of the smaller, regional stock exchanges would be de facto sub-brokers of the bigger bourses.

Meanwhile, Sebi has issued a warning that the requirements of the model tripartite agreement should be implemented strictly from April 1, 2005, and any violation of the said requirements after such date would be viewed "strictly, entailing appropriate action".

The watchdog had initially prescribed the model format of the agreement to come into effect from December 1, 2004.