Stock Broker Connect

The Negotiated Dealing System-Order Matching (NDS-OM) is RBI's own trading platform for Government Securities — traditionally used by banks and large institutions. Individual investors could not reach it directly. Stock Broker Connect is the route RBI opened for them, through their own stock broker.

RBI, vide its notification dated 7 February 2025, permitted SEBI-registered non-bank brokers to access NDS-OM, through the Master Direction – Reserve Bank of India (Access Criteria for NDS-OM) Directions, 2025.

Under that direction, any person or entity eligible to invest in Government Securities may access NDS-OM in one of three ways: direct access, indirect access, or through "Stock Broker Connect." The workbook's own definition: "'Stock Broker Connect' shall mean a mechanism through which a stock broker provides access to NDS-OM to its individual constituents/clients maintaining demat accounts with depositories registered with SEBI."

Operational ring-fencing. SEBI, vide circular dated 11 February 2025, required that SEBI-registered stock brokers offering NDS-OM access do so through a Separate Business Unit (SBU) of the broking entity, with several safeguards:

• The SBU's activities must be segregated and ring-fenced, with an arm's-length relationship, from the broker's other securities market activities.
• The SBU must be exclusively engaged in NDS-OM transacting.
• The broker must maintain a separate account for the SBU on an arm's-length basis.
• The SBU's net worth is kept segregated from the broker's own net worth in the securities market, and the broker's net-worth compliance is tested excluding the SBU.
• Because the SBU falls under a different regulatory authority's jurisdiction, the exchanges' own Grievance Redressal Mechanism, Investor Protection Fund and SCORES are not available to investors using the SBU's services.

Mr Rao holds a demat account with a depository registered with SEBI, through his regular stock broker. He wants to buy 10-year Government of India bonds directly in the wholesale G-Sec market rather than through a mutual fund.

His broker has set up a Separate Business Unit dedicated to NDS-OM access, following the SEBI circular of 11 February 2025. Through Stock Broker Connect, Mr Rao places his G-Sec order via this SBU, which routes it into NDS-OM — a platform he could never have reached directly as an individual investor.

Because the SBU's activities sit under a different regulatory jurisdiction, Mr Rao should note that if a dispute arises specifically over this NDS-OM transaction, the exchange's usual Investor Protection Fund and SCORES grievance route — the one he would use for an ordinary equity trade with the same broker — is not available to him for this particular service.

Chapter 1 (Introduction to Interest Rate, Interest Rate Instruments and Fixed Income Market), section 1.14.1.1, defines Stock Broker Connect and the Separate Business Unit safeguards, immediately after describing the RBI Retail Direct Scheme as an alternative individual access route to G-Secs. Expect a question on the three ways to access NDS-OM (direct, indirect, Stock Broker Connect) and on why exchange investor-protection mechanisms do not cover the SBU.

• Stock Broker Connect is one of three access routes to NDS-OM — direct, indirect, and through a stock broker — not the only route.
• The SBU must be exclusively dedicated to NDS-OM activity, and its net worth is kept apart from the broker's own securities-market net worth.
• Exchange investor protection tools (Grievance Redressal Mechanism, IPF, SCORES) do not cover SBU-routed NDS-OM transactions, because the SBU sits under a different regulator's jurisdiction — a frequently tested point.
• Do not confuse Stock Broker Connect with the RBI Retail Direct Scheme. The Retail Direct Scheme lets an individual open a Retail Direct Gilt account directly with RBI; Stock Broker Connect instead routes the individual's access through their own broker's demat-linked SBU.