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Informist, Monday, Aug. 18, 2025

 

MUMBAI – The Securities and Exchange Board of India has extended the timeline for implementation of margin obligations through the pledge or re-pledge mechanism in the depository system to Oct. 10, from Sept. 1 earlier. This was after the Central Depository Services (India) Ltd. and National Securities Depository Ltd. requested the market regulator to extend the timeline, it said in a circular Monday.

 

The depositories had requested SEBI to extend time to carry out system developments and to ensure system readiness by carrying end-to-end testing, the market regulator said. In its circular, SEBI has directed stock exchanges, depositories, and clearing corporations to communicate the provisions on implementation of margin obligations through the pledge or re-pledge mechanism to their members and disseminate the same on their websites, put in place appropriate systems and procedures to ensure compliance of the provisions, and to make necessary amendments to relevant bylaws, rules and regulations for its implementation.

 

In June, SEBI had made changes to the operational mechanism to initiate, release, and invoke margin pledges in depository system, to prevent misuse of clients' securities by brokers, with effect from Sept. 1. SEBI highlighted instances of brokers invoking securities pledged by clients for margin purposes but not selling them to realise money due to them, resulting in accumulation of clients' securities in brokers' dematerialised accounts, defeating the purpose for which the securities were invoked.

 

SEBI had earlier said that brokers can accept securities as collateral for margins from clients only by way of a "margin pledge". With invocations of pledged shares not resulting in the shares being sold, SEBI had decided to make the invocation and sale a combined automated process.

 

In cases where clients have sold shares and offered those shares as margin pledge, depositories will provide the functionality of a single instruction in the form of pledge release for early pay-in to the trading or clearing member, SEBI said in a circular dated Jun. 3. The pledge will be released and early pay-in block will be set up immediately in the client's demat account subject to pay-in validation--only to the extent of the delivery obligation of that client as provided by the clearing corporation to the depository without the need for physical or electronic instruction, SEBI said.  End

 

Reported by Arya S. Biju

Edited by Ashish Shirke

 

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