>  Segregated Nominee Account Structure
Segregated Nominee Account Structure
Securities & Exchange Board of India (SEBI) through its circular SEBI/HO/MRD/DRMNP/CIR/P/2018/83 dated May 24, 2018 permitted Segregated Nominee Account Structure in International Financial Services Centre (IFSC) wherein orders of Foreign Investors may be routed through eligible Segregated Nominee Account Providers.

The Broad Features of the SNA Structure are summarised below.

How does Segregated Nominee Account Structure work?

SNAS Archetype

How SNAS works?

  • Provider on-boards end-clients to trade on India INX
  • Each client can register only with one Provider
  • Provider can offer Margin Funding to clients
  • Details of end-client available only with Provider
  • Provider can choose multiple TMs for execution of trades
  • Provider can choose multiple CMs for clearing of trades
  • Trades executed by TM are cleared and settled by the designated CM of client of a Provider after give-up by the default CM of TM
  • Each Client’s trades are cleared and settled through only one CM (“Designated CM”)

How to become a Segregated Nominee Account Provider?

Who is eligible to be a Provider…

  • Entity type
    • SEBI-registered brokers in IFSC,
    • SEBI registered FPIs (Category I and II), and
    • Trading / Clearing members of international stock exchanges / clearing corporations that are regulated by a member of Financial Action Task Force (FATF)
  • Minimum net worth - USD 500,000.
Other Requirements
  • Obtain information relating to end-clients as and when sought by Exchange or SEBI
… Steps to register as Provider

3 step registration process:

  • Apply to India INX with net-worth certificate and SEBI registration details
  • India INX conducts due diligence of proposed Provider’s details
  • India INX issues a Provider Code (PCODE) to applicant
  • Select TMs to open account (optional)

How to onboard Clients as a Provider?

Who is eligible to be a Client…

  • Entity type
    • FPIs
    • EFIs
  • Client is eligible as per due diligence done by Provider following global KYC and AML compliance standards
Other Requirements
  • Adherence to Prevention of Money Laundering Act, 2002 (PMLA) including KYC by Client
… Steps to onboard a client

Provider can onboard a client in 3 steps:

  • Provider conducts AML / KYC checks on client
  • Apply to India ICC with application to onboard client providing client details and CM undertaking
  • India ICC issues CLCODE to Client through Provider and informs assigned CM
  • Provide copy of agreement with Client on margin funding, if requested by Exchange, CCP or SEBI

Trading, Clearing and Settlement for Nominee Accounts

SNAS Archetype

Trading, Clearing and Settlement

  • Clients can execute transactions through:
    • Provider (in case the Provider is a TM), or
    • Any TM with whom Provider has a Member-Client relationship
  • Provider’s TM places order on behalf of end-Client using the CLCODE as the Unique Client Code
  • Margins computed at the end-client level of ‘Provider’ and grossed up
  • Margin reporting shall be at the level of the ‘Provider’
  • Margin to be held by the Clearing Member
  • Trades are Cleared through the Designated CM after give-up by default CM of TM and confirmation by the Designated CM
  • Unconfirmed trades form part of default CM’s obligations