Negotiated Dealing System-Order Matching (NDS-OM) Platform

February 8, 2025

The Reserve Bank of India (RBI) recently announced policy change. Non-bank brokers registered with the Securities and Exchange Board of India (Sebi) will now have access to the Negotiated Dealing System-Order Matching (NDS-OM) platform. This initiative aims to increase retail participation in government securities trading. The RBI’s decision reflects an ongoing effort to enhance liquidity and accessibility for individual investors in the financial market.

About the NDS-OM Platform

The NDS-OM is an electronic trading platform managed by the RBI.
It facilitates secondary market transactions in government securities
. Introduced in August 2005, it replaced inefficient telephone-based trading.
The system allows members to place bids and offers anonymously, enhancing transparency in the market.

Membership and Participation

Currently, NDS-OM membership is limited to banks, primary dealers, insurance companies, and mutual funds.
These entities must maintain Subsidiary General Ledger (SGL) accounts with the RBI.
With the new policy, eligible stock brokers can now apply for membership, allowing them to provide individual clients access to government securities trading.
This change is expected to boost retail investor participation.

Benefits for Retail Investors

The expansion of the NDS-OM platform is designed to enhance liquidity for retail investors.
By allowing stock brokers to facilitate trades, individual investors can more easily enter and exit positions in government securities.
Improved liquidity is anticipated to attract greater interest from retail participants, especially if brokers integrate their trading platforms with NDS-OM.

Regulatory Framework and Compliance

Sebi’s consultation paper from October 2024 proposed a framework for stock brokers to engage in trading government securities. Brokers must maintain a separate business unit for these activities, ensuring an arm’s-length relationship with their other operations. They will also need to establish agreements with members of the Clearing Corporation of India (CCIL) for transaction settlements.

The Role of the Clearing Corporation of India

The Clearing Corporation of India Ltd. (CCIL) plays important role in the settlement of trades executed through the NDS-OM platform. It ensures that transactions are processed efficiently and reduces the reliance on paper-based methods. This modern approach is essential for maintaining the integrity and efficiency of the trading system.

Future Prospects

The RBI’s move to include non-bank brokers is step towards modernising the Indian financial market. As retail participation increases, the overall market may become more vibrant and competitive. The integration of technology in trading processes will likely continue to evolve, further enhancing the trading landscape for government securities.

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