SEBI Directs QSBs to Implement UPI Mechanism, 3-in-1 facility from February 1

The capital market regulator, the Securities and Exchange Board of India (SEBI) has asked qualified stock brokers to provide clients with either a UPI-based block mechanism for secondary market trades or a 3-in-one trading account option, from February 1, 2024.

SEBI Enhancing Investor Convenience 

Certain Trading Members (TMs) already provide clients with the convenience of 3-in-1 trading accounts. The primary benefit of this type of account lies in its seamless integration of a trading account with the client’s demat and bank accounts.

Since January 2024, the block mechanism for the secondary market has been available as an optional feature, leading to limited promotion by stock brokers to their clients. 

However, with the new SEBI mandate for Qualified Stock Brokers (QSBs), implementing this mechanism will become mandatory starting February 1, 2025.

According to the NSE circular released on March 19, 2024, some of the designated QSBs include Angel One Limited, Globe Capital Market Limited, HDFC Securities Ltd., ICICI Securities Limited, and Kotak Securities Ltd., among others.

Benefits of the UPI Block Mechanism for Investors

Qualified Stock Brokers (QSBs) are major brokers considered systemically important due to their high client numbers and the significant trading volumes they handle. 

Currently, investors are required to transfer funds to stock brokers in advance; however, with the block mechanism, the amount remains in the investor’s bank account but is temporarily blocked, offering greater security. 

This method is seen as an added layer of protection for investors. The UPI-based block mechanism is already widely adopted in the primary market, especially for IPO applications.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.