Outlook Business Desk
Markets regulator Sebi has proposed a major overhaul in broker capital norms, aiming to better align net worth calculations with trading scale, operational structure and the rising participation seen in Indian stock markets today.
Earlier, SEBI had linked broker net worth mainly to client funds maintained by them. However, the regulator now says this old structure does not match how brokers operate today, as the market system and fund flow mechanisms have evolved significantly.
Under the updated proposal, broker net worth will be assessed using several parameters, including 10% of average client balances over the past six months, total active client accounts, and extra weighting for clients onboarded via authorised persons.
Brokers handling direct clients with 10,000 to 50,000 active accounts will need to maintain a minimum net worth of ₹50 lakh. SEBI has also stated that capital requirements will rise further as the client base expands beyond this range over time.
For clients onboarded via authorised persons, brokers must maintain a minimum net worth of ₹5 lakh. This requirement will rise gradually based on business size and the number of clients added through such intermediaries.
SEBI has said broker net worth acts as an additional safety buffer over margin requirements. This helps ensure brokers hold sufficient capital to support trading activity and manage potential financial risks within the market system.
The new framework will require brokers with larger client bases to maintain higher capital levels. This links capital adequacy more directly with operational size and overall risk exposure across different categories of market participants.
SEBI believes stronger net worth norms can help lower systemic risk in the market. The aim is to ensure brokers handling high client volumes maintain stronger financial stability and remain resilient during market fluctuations.