The Securities and Exchange Board of India (SEBI) on Thursday extended the deadline for the implementation of direct securities payouts to client's demat account to November 11 to ensure smooth implementation, without any disruption to market players and investors.
SEBI explained that the extension, initially set for October 14, is a response to feedback received from the Brokers' Industry Standards Forum.
Revised date for implementation of new rules
"Based on the review meeting held by SEBI with MIIs and based on representation received from Brokers' ISF, it has been decided that the circularshall come into effect from November 11, 2024, in order to ensure smooth implementation of pay-out of securities directly to the client's demat account, without any disruption to the markets players and investors.
The move came just a day after the National Stock Exchange Ltd (NSE) conveyed a go-live date for the direct payouts under the T+1 rolling settlement system.
New rules previously set to be in two phases
SEBI's new rules, set to be implemented in two phases starting October 14, 2024, was to enable the direct credit of securities to investors' demat accounts after a trade, reducing the intermediary role of stockbrokers in the settlement process.
Under the current system, after investors purchase securities, the Clearing Corporation (CC) first credits these securities to the broker's pool account. The broker then transfers the securities to the buyer's demat account. The broker holds control of these securities until the final transfer is made to clients.
New system for protection of client's securities
As per SEBI, the aim of the order is to protect the client's securities, and enhance operational efficiency and risk reduction.
Securities are currently credited to the broker, who then transfers to the investor. The procedure will be more effective under the new regulations since securities will be directly credited to the investor's demat account.
No underpaid or MTF pledges
As per the new rules, the brokers will not handle pledges for securities that are underpaid or funded by margin under the new regulations. Rather, if a client fails to make a full payment for the securities, the broker will ask the CC to record the pledge in the client's demat account. The pledge will be released after the securities are fully paid.
As per the rules, once the direct payout system is implemented, the settlement payout by exchanges and clearing corporations will happen by 3:30 pm. Earlier, the timing was 1.30 pm on the payout day, which is the next day post-trade.
