Description

BSE clarifies that stock brokers must continue to maintain variable net worth at 10% of average daily cash balance of clients across segments/exchanges until SEBI specifies revised requirements under new 2026 regulations.

Summary

BSE has issued a clarification regarding the computation of variable net worth requirements for stock brokers in light of the new SEBI (Stockbrokers) Regulations, 2026. Members are instructed to continue calculating variable net worth as 10% of the average daily cash balance of clients retained with the stock broker across segments/exchanges in the previous six months, as specified under the earlier SEBI (Stock Brokers) Regulations, 1992, until SEBI specifies revised requirements under the new 2026 regulations.

Key Points

  • Variable net worth continues to be calculated as 10% of average daily cash balance of clients retained with stock broker across segments/exchanges in the previous six months
  • This calculation methodology remains unchanged from SEBI (Stock Brokers) Regulations, 1992
  • New SEBI (Stockbrokers) Regulations, 2026 provide that variable net worth will be specified by SEBI
  • Current methodology will continue until SEBI issues revised specifications under the 2026 regulations
  • Notice references previous circulars: Exchange notice 20220310-8 (March 10, 2022) and notice 20230203-19 (February 03, 2023)
  • Email queries should be directed to membership.ops@bseindia.com

Regulatory Changes

The SEBI (Stockbrokers) Regulations, 2026 have been introduced, replacing the earlier SEBI (Stock Brokers) Regulations, 1992. Under the new 2026 regulations, variable net worth requirements will be specified by SEBI rather than being defined in the regulations themselves. However, no new specifications have been issued yet, creating a transitional period where the old calculation methodology continues to apply.

Compliance Requirements

  • All BSE Members (Stock Brokers): Must continue to maintain variable net worth equal to 10% of average daily cash balance of clients retained with the stock broker across all segments and exchanges during the previous six months
  • This requirement applies across all trading segments and exchanges where the broker operates
  • Members must monitor for future SEBI notifications specifying revised variable net worth requirements under the 2026 regulations
  • Compliance monitoring should continue as per existing framework until further notice

Important Dates

  • February 23, 2022: SEBI gazette notification SEBI/LAD-NRO/GN/2022/73 issued
  • March 10, 2022: BSE Exchange notice 20220310-8 issued
  • February 03, 2023: BSE notice 20230203-19 issued (clarification to gazette notification)
  • February 05, 2026: Current clarification notice 20260205-33 issued
  • Ongoing: Existing variable net worth calculation methodology continues until SEBI specifies revised requirements

Impact Assessment

Operational Impact: Minimal immediate impact as brokers continue with the existing variable net worth calculation methodology they are already following. No changes to capital planning or compliance processes are required at this time.

Regulatory Impact: This notice provides regulatory certainty during the transition from the 1992 regulations to the 2026 regulations, preventing any ambiguity about capital adequacy requirements for stock brokers.

Future Considerations: Stock brokers should remain prepared for potential changes to variable net worth requirements once SEBI issues specifications under the new 2026 regulations. The calculation methodology or percentage requirements may be revised at that time, potentially affecting capital allocation and business planning.

Impact Justification

Clarification maintains existing variable net worth calculation methodology during regulatory transition from SEBI (Stock Brokers) Regulations 1992 to 2026, ensuring continuity of capital adequacy requirements for brokers without immediate operational changes.