Its latest and significant initiatives is the Application Supported by Blocked Amount (ASBA) facility for secondary market trading. ASBA is a payment mechanism that allows investors to block their funds in their savings accounts instead of transferring the money to the broker’s account during IPO subscriptions. This ensures the safety of investor funds and streamlines the process of applying for shares in an IPO, with a reduction in the time taken for refunds and providing greater liquidity to investors.
Now the ASBA facility can also be applied to secondary market trading, which could result in a real-time settlement process. This method allows investors to block their funds in their accounts while placing an order. Once the order is executed, the funds will remain blocked until the shares are credited to the demat account. Shivanand Pandit tries to find the benefits this approach could offer to investors.
The capital markets regulator, the Securities Exchange Board of India (SEBI), in the last week of March 2023, approved a framework for an Application Supported by Blocked Amount (ASBA)-like facility for trading in the secondary market. The action is seemingly targeted at refining translucency and protection to client funds lying with the stockbrokers. The facility will be discretionary for investors and brokers. The framework will be executed in a phased fashion, to enable a smooth transition in the capital market.
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