The International Financial Services Centres Authority (IFSCA) on June 21, 2023, issued a notification regarding Direct Market Access (DMA) facility.
The following has been stated namely: -
• The Broker-Dealer shall maintain a sound audit trail for all DMA orders and trades and should at all times be able to identify actual user-id for all such orders and trades. The audit trail data should be available for at least 10 years, from the date of execution of trades.
• The Stock Exchange shall have the operational flexibility to put in place the necessary measures, procedures, and guidelines for DMA orders and trades.
• Responsibilities of the Broker-Dealer & due diligence of prospective clients:
1. The Broker-Dealers shall specifically authorize prospective clients for providing a DMA facility
2. The Broker-Dealers are required to maintain proper records of such due diligence. Individual users at the client end shall also be authorized by the Broker-Dealer based on minimum criteria. The records of user details, user-id, and such authorization shall be maintained by the Broker-Dealer. Details of all user-ids activated for DMA shall be provided by the Broker-Dealer to the Stock Exchange
• The Broker-Dealer shall:
1. Ensure that the trading limits, exposure limits, and position limits are set for all its DMA clients based on risk assessment, credit quality, and available margins of the client.
2. Have appropriate authority levels to ensure that these limits are established only by persons authorized by the Chief Risk Officer or Chief Compliance Officer or any other such senior employee of the Broker-Dealer authorized to have oversight over the Compliance or Risk Management functions.
• A client of a Broker-Dealer may sub-delegate its DMA/SA facility to its own client (sub-delegatee), subject to the condition that the client sub-delegating the DMA/SA facility is an entity, regulated in any capacity, by a securities market regulator which is a signatory to the International Organization of Securities Commission’s Multilateral Memorandum of Understanding (IOSCO-MMoU).
• All DMA/SA orders must be offered to the market for matching. The Broker-Dealers using the DMA facility for routing client orders shall not be permitted to cross trades of their clients with each other. The clients using and sub-delegating the SA facility, shall not be permitted to cross trades of the sub-delegatees with each other
[Notification No. IFSCA/CMD-DMIIT/EXCHTRD/2023-24/001]
