Markets regulator Sebi is looking to come out with Application Supported by Blocked Amount (ASBA)-like structure for the secondary market, its chairperson Madhabi Puri Buch said on Wednesday.
ASBA is an application containing an authorisation to block the application money in the bank account, for subscribing to an initial public offering (IPO). If an investor is applying through ASBA, their application money will be debited from the bank account only if the application is selected for allotment after the basis of allotment is finalised, or the issue is withdrawn or failed.
“We are actively engaged in looking at ASBA-like (structure) in the secondary market. If it can be done in the primary market why can’t it be done for the secondary market,” Buch said, while addressing the Global Fintech Fest 2022. She added that the attempt with this move is to reduce structural vulnerability.
Sebi is also planning to narrow the regulatory gap in the start-up ecosystem, Buch stated.
How ASBA works
In an IPO, the ASBA system helps ensure that money from an investor gets moved only when an allotment happens.
“There is likely to be a regulatory gap when there is something new and innovative that happens in the market. It is up to the regulator to keep pace with that.
“In the past, we have been a little late to the party. It is our intention now to narrow that gap as much as possible,” she said.
The Securities and Exchange Board of India (Sebi) chief asked entrepreneurs to ensure transparency in their business models as it helps investors make informed decisions. “If your business model is going to rely on a black box which is not open to sunlight for disinfecting, if it is not capable of being validated and audited, and your claims cannot be audited and validated, it cannot be permitted.”
She also said the Sebi is not in favour of or against algorithmic (algo) trading, provided there is transparency and disclosure.
Earlier this month, the watchdog issued guidelines for stock brokers providing algo trading facility to investors. This was aimed at preventing any misselling and protecting investors’ interest in stock markets. Algo trading includes any type of automated rule-based trading where decision making is delegated to a computer model.
Buch said that anonymity in the financial world is an absolute no-no and that should be the first guiding principle in the checklist of an entrepreneur or private-equity funding entity.
She said Sebi will not approve any business which relies on a model of building barriers for its customers to exit. “We do not want ‘Abhimanyus’ in our market. Please ensure that your business model does not rely upon ‘ki woh ek baar aa gaya, toh usko hum pakad kar rakhenge, bahar nahin jaane denge’.”
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The Sebi chief said any data which is available in the market on account of the disclosures mandated by the regulator cannot be owned by any private person and has to be available free of cost.
“Data is a public good. It is a public infrastructure. No private person can claim ownership over this infrastructure. We ensure that it is made publicly available in any file, form or manner … everything is free and nobody can charge you for it.”
