CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD-1/P/CIR/2024/14 March 11, 2024
To
All Recognized Stock Exchanges
Stock Brokers through Recognized Stock Exchanges
Sir/Madam,
Measures to instill trust in securities market – Expanding the framework of
Qualified Stock Brokers (QSBs) to more stock brokers
1. In order to further strengthen the compliance and monitoring requirements of the
stock brokers through mandating enhanced obligations and responsibilities on
stockbrokers, SEBI, vide circular no. SEBI/HO/MIRSD-PoD-1/P/CIR/2023/24
dated February 06, 2023 and para 18 of Master Circular for Stock Brokers dated
May 17, 2023 inter-alia stated that the following four parameters shall be
considered for designating a stockbroker as QSB, on an annual basis:
1.1. the total number of active clients of the stock broker;
1.2. the available total assets of clients with the stock broker;
1.3. the trading volumes of the stock broker (excluding the proprietary trading
volume of the stock broker);
1.4. the end of day margin obligations of all clients of a stock broker (excluding
the proprietary margin obligation of the stock broker in all segments)
2. Based on the aforementioned parameters, the first list of QSBs was issued by
stock exchanges on March 03, 2023.
3. To further protect the interest of investors and for building trust in securities
market, it has been decided to extend the framework of QSBs to more
stockbrokers. Henceforth, the revised list of QSBs shall be calculated by
considering the following parameters, in addition to above mentioned four
parameters:
3.1. compliance score of the stock broker;
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3.2. grievance redressal score of the stock broker; and
3.3. the proprietary trading volumes of the stock broker.
4. Accordingly, the revised framework with regard to the parameters for designating
a stockbroker as QSB and procedure for identifying a stock broker as QSB is as
follows:
Parameters for designating a stock broker as QSB:
4.1. The following parameters shall be considered for designating a stock broker
as QSB:
4.1.1. the total number of active clients of the stock broker;
4.1.2. the available total assets of clients with the stock broker;
4.1.3. the trading volumes of the stock broker (excluding the proprietary
trading volume of the stock broker);
4.1.4. the end of day margin obligations of all clients of a stock broker
(excluding the proprietary margin obligation of the stock broker in all
segments)
4.1.5. the proprietary trading volumes of the stock broker;
4.1.6. compliance score of the stock broker; and
4.1.7. grievance redressal score of the stock broker.
Procedure for identifying a stock broker as QSB:
4.2. The following procedure shall be followed for identifying a stock broker as
QSB:
4.2.1. For each stock broker, the percentage (%) of a particular parameter
compared to aggregate of the respective parameter summed across
all stock brokers shall be calculated, viz. % of count of active clients
for a particular broker shall be calculated by dividing the individual
count of active clients for a particular broker by total number of active
clients of all the stock brokers and the value is multiplied by 100.
Similarly, individual % shall be calculated for all the parameters
mentioned at para 4.1.1 to 4.1.7 above.
4.2.2. Based on the % of various parameters calculated above, the
following stock brokers shall be identified as QSBs:
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4.2.2.1. Stock brokers with a total sum of individual % of the
parameters mentioned at para 4.1.1 to 4.1.5, greater than
or equal to six point two five (6.25) shall be identified as
QSBs.
4.2.2.2. In case of the parameter mentioned at para 4.1.6, i.e.,
compliance score of the stock broker, all stockbrokers
(subject to maximum of 5) shall be considered as QSBs,
if their individual compliance score is equal to or more
than 2%.
4.2.2.3. In case of the parameter mentioned at para 4.1.7, i.e.,
grievance redressal score of the stock broker, all
stockbrokers (subject to maximum of 5) shall be
considered as QSBs, if their individual grievance
redressal score is equal to or more than 5%.
4.3. The values shall be calculated on an annual basis and the revised list of
QSBs shall be released jointly by stock exchanges, in consultation with
SEBI. For calculating the values for a particular year, parameters as on
December 31st of such year shall be considered.
4.4. Once the revised list of QSBs is released, those QSBs which no longer
belong to the list, shall continue to comply with the enhanced obligations
and responsibilities, for an additional period of 3 financial years or such
time, as may be specified by Market Infrastructure Institutions (MIIs), in
consultation with SEBI.
Facilitating stockbrokers to voluntarily get designated as QSBs:
4.5. In order to strengthen the compliance culture among stock brokers and
thereby, encourage stock brokers to follow the enhanced obligations and
responsibilities, it has been decided to facilitate stockbrokers to voluntarily
get designated as QSBs, who otherwise would not have qualified to become
QSBs by virtue of the parameters enumerated at para 4.1.
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4.6. Such voluntarily designated QSBs shall have to abide by all the enhanced
obligations and responsibilities for QSBs stated at para 18.5 and 18.6 of the
master circular including such other provisions as may be prescribed by
SEBI/stock exchanges from time to time. The detailed operational
modalities in this regard shall be issued by stock exchanges, in consultation
with SEBI.
5. Applicability:
5.1. The provisions of this circular shall come into force in a risk-based,
staggered manner to ensure smooth adoption and effective implementation
for all the QSBs by providing enough time for them, based on their size, for
making necessary changes.
5.2. Based on the above, the effective date of implementation for different QSBs
based on the parameter by which they are designated as QSBs has been
prescribed in the table below:
Parameters based on which a broker is Applicability of the
designated as QSB circular
Parameters mentioned at para 4.1.1 to 4.1.5 June 1st of the
above subsequent year
Parameters mentioned at para 4.1.6 and 4.1.7 September 1st of the
above subsequent year
Amendments to Master Circular for Stock Brokers dated May 17, 2023:
6. Based on the revised framework stated above, master circular is amended to the
extent stated below:
6.1. Para 18.4 of the master circular is replaced with para 4 stated above.
6.2. Para 18.7 of the master circular is replaced with para 5.2 stated above.
All other provisions of the master circular shall remain unchanged.
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7. Stock Exchanges are directed to:
7.1. bring the provisions of this circular to the notice of stock brokers and also
disseminate the same on their websites;
7.2. make amendments to the relevant bye-laws, rules and regulations for the
implementation of the above provisions;
7.3. issue the revised list of QSBs (excluding list of QSBs stated at para 4.5 of
this circular).
8. This circular is issued in exercise of powers conferred under Section 11(1) of
Chapter IV of the Securities and Exchange Board of India Act, 1992, read with
Regulation 30 of Chapter VII of SEBI (Stock Brokers) Regulations, 1992 to
protect the interests of investors in securities and to promote the development
of, and to regulate the securities market.
9. This circular is available on SEBI website at www.sebi.gov.in under the category
"Circulars".
Yours faithfully,
Aradhana Verma
General Manager
Tel. No.: +91-022 26449633
Email: aradhanad@sebi.gov.in
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