Trading Preferences Format — Why Brokers Must Offer Access Across All Active Exchanges
SEBI has standardised the format of "Trading Preferences" to ensure that clients are permitted to access all the stock exchanges in which the stock brokers are registered for the same segment. The format is specified in the trading account opening documents and requires clients to indicate their preferences for trading in different exchanges/segments. This article explains the format, the default access rule, and the opt-out mechanism.
The Regulatory Basis
SEBI Master Circular for Stock Brokers requires that the format of "Trading Preferences" has been standardised as specified in the trading account opening documents. The format is designed to ensure that clients have access to all active stock exchanges for the segments they have opted for.
The Trading Preferences Format
The trading preferences format is part of the Account Opening Form and requires clients to indicate their preferences for trading in different exchanges and segments. The format typically includes:
- Exchanges: NSE, BSE, MSEI, MCX, NCDEX, etc.
- Segments: Cash / Mutual Fund, F&O, Currency, Debt, Commodity Derivatives, etc.
Clients must sign in the relevant boxes where they wish to trade and strike off the segment not chosen by them.
The Default Access Rule
Stock brokers are mandated to register their new clients on all the active stock exchanges after obtaining the trading preferences. For existing clients, the stock brokers are mandated to offer them access on all the active stock exchanges for the segments already opted by them, as a default mode.
Implementation for Existing Clients
- Stock brokers must offer existing clients access on all active stock exchanges for segments already opted by them.
- This must be done within three months from the effective date of the circular.
- Clients must be informed through email / SMS.
- Clients shall be given a choice to opt out of such access by providing negative consent in this regard.
Activation/Deactivation
The stock brokers shall activate / deactivate the segments based on the preference of the clients.
The Opt-Out Mechanism
For New Clients
The opting out facility should be provided to new clients at the time of account opening. Negative consent should be obtained separately from clients in writing.
For Existing Clients
The opting out facility should be provided to existing clients when offering them access on all active stock exchanges. Negative consent should be obtained separately from clients in writing.
Record Maintenance
Stock brokers shall be mandated to maintain records of such written negative consent provided by the clients for at least five years.
Applicability
Equity and Commodity Derivatives
The aforementioned provisions regarding trading preferences are applicable to all stock brokers. However, the format of "Trading Preferences" shall not be made applicable to members registered exclusively with commodity derivatives exchanges. Such members shall use the format as prescribed by the erstwhile Forward Markets Commission (FMC).
Clients Registered Under SEBI Circular No. SEBI/HO/MIRSD/DOP/CIR/P/2020/73
The provisions are also applicable to clients registered in accordance with SEBI Circular No. SEBI/HO/MIRSD/DOP/CIR/P/2020/73 dated April 24, 2020.
Client Responsibilities
- Indicate preferences clearly. Clients must clearly indicate their preferences for trading in different exchanges/segments in the Account Opening Form.
- Sign against preferences. Clients must sign against the preferences they have indicated.
- Strike off not chosen. Clients must strike off the segment not chosen by them.
How We Help
At Anuj Desai & Associates, we help stock brokers implement the trading preferences format, offer access across all active exchanges, and manage the opt-out mechanism. If you need assistance with trading preferences compliance, reach out to our regulatory compliance desk.