Facts for Prelims (FFP)
Source: Indian Express
Context: The Securities and Exchange Board of India (Sebi) approved a framework for an Application Supported by a Blocked Amount (ASBA) like facility being made available to investors for secondary market trading.
About ASBA:
ASBA stands for Application Supported by Blocked Amount. It is a facility that allows investors to apply for initial public offerings (IPOs) and invest in the stock market without actually transferring the money to the IPO issuer or stockbroker upfront. Instead, the investor’s application money is temporarily blocked in their bank account until the shares are allotted to them.
This helps investors earn interest on their money while it is blocked and also eliminates the risk of fraud or misappropriation of funds by intermediaries.
Features:
- Under the framework client will continue to earn interest on his blocked funds in his savings account till the time amount is debited.
- There will be a direct settlement with the clearing corporation (CC), without passing through the pool accounts of the intermediaries, thereby providing client-level settlement visibility to CC and thus avoiding the risk of co-mingling of clients’ funds and securities.
More guidelines for trading in the Secondary Market:
- Set up a Corporate Debt Market Development Fund (CDMDF) in the form of an Alternative Investment Fund to act as a backstop facility for the purchase of investment grade corporate debt securities during times of stress to instil confidence amongst the participants in the corporate bond market.
