The Reserve Bank of India has made a significant decision to allow non-bank brokers registered with SEBI direct access to the Negotiated Dealing System – Order Matching (NDS-OM). This electronic trading platform facilitates secondary market transactions in government securities (G-sec).
According to the RBI, access to NDS-OM was previously limited to regulated entities and clients of banks and standalone primary dealers. However, with the aim of broadening access, non-bank brokers registered with SEBI will now be able to access NDS-OM on behalf of their clients. The RBI emphasized that these brokers must comply with the regulations and conditions set by the Reserve Bank. Specific instructions will be issued separately to facilitate this access.
This move has been hailed as a pro retail investor initiative by industry experts. Venkatakrishnan Srinivasan, founder of Rockfort Fincap, believes that this decision will bridge the gap for small investors to access government bonds, potentially leading to increased trading activity and improved price discovery, especially for smaller trade sizes. He also emphasized the importance of educating retail investors on how bond markets operate, particularly in understanding the inverse relationship between bond prices and interest rates.
ICRA Ratings Vice-President Deep Inder Singh also expressed positivity towards the RBI’s decision. He believes that allowing non-bank brokers to access NDS-OM will enhance liquidity for retail investors in government securities, ultimately attracting more interest from this segment. Additionally, the rating agency forecasts increased interest in government securities from retail investors if brokers integrate their trading platforms with NDS-OM.
Overall, this development is expected to simplify and lower the cost for regular investors to purchase government bonds, while also improving liquidity and trading opportunities for retail investors in the government securities market. The RBI’s decision is seen as a positive step towards broadening participation and enhancing accessibility in the government securities market.
