FIA has responded to the Securities and Exchange Board of India's consultation paper on revisions to the variable net worth framework for stock brokers. The proposals would shift from a methodology based on client cash balances retained by brokers to a broader framework based on average client credit balances and the number of active clients.
FIA’s response supports SEBI’s objective of strengthening broker resilience, while recommending recalibration of the methodology to ensure it remains risk-based and proportionate, particularly in light of India’s pre‑funding, upstreaming and CCP-level risk safeguards. The response highlights that the framework should reflect existing safeguards in the Indian market, including pre‑funded margins, real-time risk controls and CCP default management. It also notes that client balances should not be used as a proxy for broker risk, as these are segregated, upstreamed and function as collateral rather than broker exposures.
More broadly, FIA emphasises that any increase in net worth requirements should be proportionate and clearly linked to residual broker-level risk and should avoid duplicating existing protections or creating unintended impacts on market costs, liquidity and competition.
Read the response in full.
