Zee Biz Exclusive: Sebi contemplating concept of Systemically Important Brokers to safeguard interests of brokers, investors – What it is? Its meaning? EXPLAINED

Markets regulator SEBI is contemplating a new concept to additionally safeguard big brokers and investors connected to them. This concept – Systemically Important Brokers – might be like the Systemically Important Status concept as implemented by RBI for big banks and non-banking finance companies. According to the sources, this discussion is in the primary stage but this may prove to be really important considering the numbers of new investors added into to the market and increased size of brokers.

After Karvy Stock Brokings failure, Sebi is taking new steps to safeguard the interests of brokers and investors, and the concept of Systemically Important Brokers (SIB) is in line with the same. As per Zee Business sources, if the concept advances into further stages, then strict norms pertaining to capital structure and risk management may be brought in for brokers. Also, additional measures on technical aspects and their capacity to absorb shocks may be suggested. 

However, there is lot that needs to be discussed and debated for deciding the criteria for the systemically important tag but as per market experts and broking business veterans, there might be multiple parameters like size of business in terms of turnover, AUM, number of active clients and their interconnectedness into the whole system. Though many believe that number of active clients must be a criterion for this tag. 

If the number of active client criterion gets significance, then many brokers may be impacted. 

However, all brokers don’t update the clients ‘ number regularly but the public data available as of March 2022 reveals that, Zerodha is at top with around 64 lakhs active clients, Upstox has 58 lakhs, Groww has 40 lakhs, Angel One has around 37 lakh active clients.  ICICI Securities has 30 lakhs, Kotak Securities has 13 lakhs, HDFC Securities has 11.5 lakhs and IIFL Securities has 11.5 lakhs active clients.

According to people in the know of the discussion, if the initial discussion is fruitful then SEBI may come up with a consultation paper at a later stage. 

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