Sebi plans risk-based calculation for variable net worth of brokers
AND OfficeLast updated: April 25, 2026 at 09:45:00 IST
Synopsis
In a game-changing initiative, the Securities and Exchange Board of India is set to revamp the method of calculating variable net worth for stockbrokers. This reform aims to align capital adequacy with the actual risks of their operations and the size of their customer pool.
THE Securities and Exchange Board of India (Sebi) on Friday proposed an overhaul of the way stock brokers calculate their variable net worth, seeking to align capital requirements with real business risks and customer scale. Currently, the variable net value is linked to 10% of the customer’s average daily cash balance retained by brokers.
However, with the introduction of an upstream framework where client funds are routed upstream by brokers to clearing companiesthere is a minimum amount of clients’ cash balance that is maintained by a securities broker, the regulator said.
“In this context, calculation based on availability of funds with stock brokers may not be an effective way of calculating variable net worth,” Sebi said in a discussion paper.
The regulator proposed a more comprehensive approach, risk-based approach. It specifies that the variable net value would be calculated as an aggregate of two key elements: one part linked to client funds and another linked to the size of the clientele.
The first part would require brokers to maintain 10% of the average credit balance of all clients over the previous six months. The second introduces tiers based on the number of active customers. Brokers with between 10,000 and 50,000 direct clients would need an additional ₹50 lakh, with incremental increases for every additional 50,000 clients.
Additionally, graduated requirements have been proposed for clients onboarded through authorized persons.
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