SEBI move on DMA will hit stock brokers

In a move that may hit brokers, stock market regulator Sebi is considering a revamped Direct Market Access (DMA) facility under which investors can trade directly on the exchanges without going through a stock broker.

Under the new norms, whoever wants to trade directly need not enter into a separate ‘broker-client agreement’ and it would be replaced by a simpler ‘terms and conditions’ document.

The broker, however, would have to specifically authorise clients or investment managers acting on behalf of the clients for providing DMA facility, after fulfilling Know Your Client (KYC) requirements and carrying out necessary due diligence.

The broker would have to maintain proper records of such due diligence procedures, Sebi said in a circular.

Currently, the DMA facility is available only for the institutional clients.

Nithin Kamath, Founder and CEO, Zerodha said in a tweet, “DMA has always been available for institutions, but through a broker. Can this be offered to retail without broker? Yeah, but retail investors use a broker for the platform (UI, UX, different order types, reporting, etc) on which they trade, DMA is not suitable”.

“The biggest task for a broker is handling customer queries, complaints, etc. The industry has tens of thousands of employees for this. Can exchanges take over this and also act as a regulator to regulate itself when it comes to customer grievances? Maybe not”, Kamath said.