Market regulator Sebi notified the norms for designating certain large brokers as Qualified Stock Brokers (QSBs) to enhance compliance on Monday.

In a circular, the regulator noted the activity concentration due to certain brokers monopolising a significant market share. To curb any adverse impact on the market due to the failure of these brokers or any other potential risks, these QSBs will have to comply with enhanced guidelines.

The stock exchange has been instructed to provide a first list of such brokers within 15 days. In addition, exchanges must ensure that the QSB has implemented the enhanced norms and obligations set out in the notification and report to Sebi within seven days of implementation.

Parameters such as active clients as of 31 December, client assets, trading volume and client’s end-of-day margin obligations will be considered before nominating a broker as a QSB. Brokers will be assigned a score based on these parameters, and brokers above five will be designated QSB.

“Stockbrokers designated as QSBs must meet higher obligations and perform duties to ensure proper governance structures, appropriate risk management policies and processes, scalable infrastructure and appropriate technical capabilities, frameworks for orderly closure, A strong cybersecurity framework and investor services, including an online complaints and grievance mechanism,” the circular said.

These QSBs will have an enhanced governance structure, with a board of directors or similar body responsible for observing operations and updating the exchange from time to time.

Additionally, these QSBs should establish mechanisms related to cybersecurity, business continuity planning, online complaint remediation, vulnerability assessment, and risk management. They should also have regular audits every six months.