Stocks

SEBI nixes margin requirement for sellers in the cash segment

Our Bureau Mumbai | Updated on July 16, 2021

Brokers just need to tell depositories to block the shares intended to be sold

SEBI has eased margin related processes for those selling shares in the stock market.

No more do stock brokers need collect upfront margin from sellers in the cash segment. They can ask the depository player holding a client’s demat account to block the shares intended to be sold and release them at the end of the day if the sale does not happen.

Also, the shares do not have to be transferred to the broker’s account for the sale, per SEBI’s new block mechanism.

The instruction to block the client’s shares can be given via electronic delivery instruction slip (eDIS).

Ever since SEBI tightened the margin rules last year, brokers have been complaining that clients were shifting to online discount brokers due to this.

Mumbai-based market dealers told BusinessLine that so far only a few large brokers were using the DIS to block or unblock client shares but now this mechanism will be widely used.

Also, there is a view that SEBI’s block mechanism may not be a whole new idea since brokers had already put into practice the mechanism of early pay-in for shares sold. In this, the delivery of shares sold is given the same day and a pre-assigned client power of attorney (PoA) is used for this specific purpose only, brokers said.

“Shares lying in a client’s demat account will be blocked either by the client himself using the depository’s online system or eDIS mandate or through depository participant based on physical DIS given by client or via a PoA. Depositories may block the securities in the client’s demat account in respect of Intra or inter depository transfer instruction till pay-in day. The blocked securities will be transferred only after checking against the client level net delivery obligation received from clearing corporations of stock exchanges,” SEBI said.

“All these mechanisms are being streamlined so that SEBI can bring the same-day settlement process,” a member of the brokers association said.

SEBI has said that a block on shares will be cancelled by the end of the day if the sell order is not executed. Also, the early pay-in mechanism, where shares are delivered the same day, will continue. Pay-in and pay-out mechanisms form the core of the settlement process after the purchase/sale of shares.

Currently Indian markets follow T+2-day settlement wherein delivery of shares and payout happen within three days after shares are sold. There is a view within SEBI to make this settlement a same-day process.

Published on July 16, 2021

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