On Wednesday, the Securities and Exchange Board of India (Sebi) announced a new mandatory process for the direct payout of securities to clients’ accounts in order to improve operational efficiency and reduce risks. This new process will come into effect from October 14, with securities being credited directly to the respective client’s demat account by the clearing corporations. This decision follows extensive discussions with stock exchanges, clearing corporations, and depositories.
The current practice involves the clearing corporation crediting the payout of securities to the broker’s pool account, who then transfers them to the client’s demat account. With the new change, securities will be directly credited to the client’s demat account, eliminating the need for an additional step. In addition, clearing corporations will need to establish a mechanism for trading members (TM) or clearing members (CM) to identify unpaid securities and funded stocks under the margin trading facility.
In case of any shortages resulting from the inter se netting of positions between clients (internal shortages), TMs or CMs should handle such shortages through an auction process. It’s also important to note that brokers should not impose any additional charges on clients beyond those levied by the clearing corporations in such scenarios.
In May 2023, Sebi outlined specific processes related to the handling of clients’ securities during pay-in and pay-out to safeguard clients’ securities and ensure that stock brokers segregate clients’ securities to prevent misuse.