Sebi may allow work from home for brokers | Mint
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Business News/ Markets / Stock Markets/  Sebi may allow work from home for brokers

Sebi may allow work from home for brokers

The change comes after compliance relaxations during the lockdown allowed brokers to operate terminals from home

Exchanges allowed brokers to trade from alternative locations from March (Photo: Mint)Premium
Exchanges allowed brokers to trade from alternative locations from March (Photo: Mint)

MUMBAI : The stock market regulator is planning to scrap an old rule preventing brokers from operating trading terminals from locations other than those reported to the exchange, two people aware of the matter said, raising the possibility of many brokers working from home over the longer term.

The change comes after compliance relaxations given to brokers during the coronavirus lockdown allowed them to operate terminals from home or other remote locations.

These relaxations given by the Securities and Exchange Board of India (Sebi) worked without a glitch and are likely to continue till at least June end, the people cited above said on condition of anonymity. This, they said, has strengthened the argument that modern trading systems are entirely electronic and should not be reliant on location of things or people.

“Perhaps there was a time when these restrictions were relevant, but the experience of trading from other than registered locations during the lockdown suggest that we should revisit these," said one of the two people, a regulatory official.

Currently, whenever a stock broker operates a terminal from a particular location, that place is considered his branch office and will require display of name boards and stock broker’s certificate. They are also required to register such location in the exchange system. On 20 March, as the pandemic spread, exchanges allowed trading from locations other than the registered ones, following an exemption given by the regulator.

“Otherwise, allowing terminals to be operated from locations other than registered ones could have been misused for illegal dabba (trades done outside the exchange platform) trading. However, the situation assessed by Sebi shows dabba trading has gone down during lockdown," said the second person, an exchange official.

Many foreign broking firms have demanded this relaxation since 2018, when Sebi and the exchanges began considering extending trading hours. The proposal to increase trading hours had met with resistance from smaller brokers as they said such a move would require more investment and dependence on technology, which they could not meet.

In a blog post on 25 March, J.R. Varma, a professor at IIM Ahmedabad and chairman of Sebi’s Secondary Market Advisory Committee, also made a case for removing location curbs.

“Securities regulators have made things worse by compliance requirements that encourage intermediaries to centralise key functions in a single geographic location. Regulators forgot that we must not create any single point of failure in systemically important securities markets," Varma wrote.

Under the proposed norms, exchange members would need to form a policy on controls and checks to prevent unauthorized trading. “This will be an extension of what was allowed by exchanges—such as, the policy would need to list the users and details of who will be permitted to operate from such location," said the exchange official.

Brokers also see business sense in the proposal as this will reduce realty costs. “At some point, the biggest cost was on technology, but now it is real estate. Internet trading solutions have become easier to access. Perhaps the entire margin reporting requirement could be done via cloud to ensure adequate transparency to exchanges and regulator and reduce compliance burden for brokers," said a broker who did not want to be named.

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Jayshree P Upadhyay
Jayshree heads a team of reporters focussing on legal, regulatory, investigative stories. She has worked for over a decade, reporting on financial scams, legal stories and the intersection of corporate and regulatory issues. She is based in Mumbai and has previously worked with Business Standard, Mint, The Morning Context and Bloomberg TV India.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Check all the latest action on Budget 2024 here. Download The Mint News App to get Daily Market Updates.
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Published: 15 Jun 2020, 11:37 PM IST
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