SEBI has given some more flexibility to the market players by recently increasing the time period in which market players have to give direct payout of securities to client’s demat account. It has been extended to 11th November, 2024 which most stockbrokers, clearing corporations (CCs) and investors would require to facilitate change. Many liked liked this extension as the earlier set date was fast approaching and was due on 14th of October in 2024.
What Does This Mean for Investors?
The upcoming changes concern both traders and investors. The new measures proposed by SEBI are expected to increase operation efficiency and manage risk since the client securities should be directly credited in the clients’ demat account rather than the brokers’ pool account. It also aims at protecting the clients’ assets of those clients that consult the firm than under the previous arrangement.
It will also take a shorter time to process the direct payouts. SEBI has revised the payout time from 1:30 PM to 3:30 PM, making sure that securities will be credited in the clients’ accounts on the given settlement day, and not in one working day later as it is at present.
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Why the Extension?
As it has been seen some benefits of the new system will go to the investors though there is some drawback in the transitional process leading to the new system., The CCs only worked out the rules for this direct payout process in late August after holding the Brokers’ Industry Standards Forum with industry gurus.
This timed forced SEBI to have some apprehension regarding the market affected due to certain disturbances which got addressed after receiving the feedback from the brokers and other Market Infrastructure Institutions (MIIs). The aim of this extension is to allow a smooth transition without causing glitches for market players and investors. So, the extra month should help ensure a glitch-free rollout.
What’s Changing?
The SEBI circular dated June 2024 specified that in the equity cash segment, including futures and options (F&O) physical settlements, the securities for payout be deposited directly to the related client’s demat account by the CCs. This represents a considerable change from the usual procedure, in which securities are first credited to the broker’s pool account and then distributed to clients.
For unpaid securities, SEBI states that the procedures outlined in the Master Circular for Stock Brokers, dated May 22, 2024, will apply. These steps are intended to protect client assets and guarantee that brokers correctly separate client securities.
What’s Next?
SEBI has been working closely with stock exchanges, depositories, and clearing organisations to ensure a smooth transition to the new system. Discussions with the Intermediary Advisory Committee and industry forums, such as the Brokers’ ISF, were critical in developing these final standards.
For traders and investors, these developments indicate a safer and speedier securities transfer process, adding another degree of confidence and efficiency to the marketplace. As we approach the revised deadline of November 11th, market participants may expect a more easy experience and quicker repayments.
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Conclusion
SEBI’s recent extension of the deadline for direct payments of securities to clients’ demat accounts till November 11, 2024 is a beneficial move for investors and market participants. The changes have the goal to improve operational efficiency, decrease risks, and ensure that securities are deposited directly to clients’ accounts on the same settlement day, rather than stored in brokers’ pool accounts. The change, which was made possible by joint work with industry stakeholders, promises to increase the safety and speed of securities transfers, ultimately promoting more confidence in the trading environment. The extra time enables for a more efficient executing of these substantial improvements.
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