The Securities and Exchange Board of India (SEBI) on Wednesday, March 29, approved a broad framework for Application Supported by Blocked Amount or ASBA-like facility being made available to investors for secondary market trading. The facility shall be optional for investors as well as stock brokers.

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The ASBA framework applies to initial public offers (IPO) and other primary market issues, where the blocked fund remains in your account earning interest. The facility, which will now be applicable to secondary markets, seeks to allow the client to continue earning interest on their blocked funds in the savings account till the time the amount is debited and direct settlement is done with the Clearing Corporation — without passing through pool accounts of the intermediaries.

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"Independent and reliable identification of ownership of cash collateral available to Clearing Corporations without the need to rely on reporting or allocation by members (Trading Member/Clearing Member), thereby eliminating risk of inadvertently erroneous or fraudulent reporting by intermediaries," SEBI said.

Further, it will lead to the elimination of custody risk of client collateral (which is currently retained by the members and not transferred to Clearing Corporation), hassle-free and immediate unblocking of client's funds or release of securities in case of a member default, and no adverse impact on client payout even in case of a member or fellow client default.

(Edited by : Shoma Bhattacharjee)