The Reserve Bank of India (RBI) recently issued updated guidelines concerning access to the Negotiated Dealing System – Order Matching (NDS-OM) platform, broadening the range of eligible entities and streamlining the process for obtaining access. The NDS-OM platform is an electronic trading system for government securities, allowing participants to trade and settle these securities efficiently. The RBI’s updated directions are part of its continued effort to modernize and improve market access and transparency in India’s financial system.
Expanding Direct Access
Under the updated guidelines, direct access to the NDS-OM platform has been extended to a wider array of regulated entities. These include banks, standalone primary dealers, non-banking financial companies (NBFCs), housing finance companies, mutual funds, pension and provident funds, insurance companies, and all India financial institutions like NABARD, EXIM Bank, SIDBI, and others. Additionally, regulated Market Infrastructure Institutions (MIIs) may invest their settlement guarantee fund in government securities, subject to RBI’s specific permission. The RBI has also reserved the right to extend direct access to any other entity it may deem fit.
The shift to allow a broader spectrum of financial institutions to directly access NDS-OM reflects the RBI’s commitment to fostering inclusivity and competition in the government securities market. By enabling more participants to trade directly on the platform, the RBI aims to improve market depth and liquidity, ensuring a more efficient price discovery process for government securities.
Streamlined Process for Access
Entities seeking direct access to NDS-OM must meet specific criteria laid out by the RBI. The prerequisites include maintaining a Subsidiary General Ledger (SGL) account with the RBI, holding a current account with either the RBI or a designated settlement bank, and being a member of the Clearing Corporation of India Limited’s (CCIL) securities settlement segment. Eligible entities can apply directly to the RBI using the prescribed format or seek access through the procedure outlined in the RBI’s Master Directions on Access Criteria for Payment Systems, which has been amended over time to reflect changing market dynamics.
In processing applications, the RBI retains the right to request additional information, seek recommendations from regulators, and impose conditions based on the applicant’s market conduct and compliance with regulatory norms. Access granted to an entity is non-transferable, and the RBI reserves the authority to terminate or suspend access if any violations occur or if maintaining access is deemed detrimental to the public interest or financial system stability.
