MIIs launch direct payout settlement for securities to enhance efficiency

Market infrastructure institutions (MIIs), comprising stock exchanges, clearing corporations and depositories, on Sunday announced the successful implementation of the direct payout settlement mechanism for securities.

Under this new system, clearing corporations will now transfer securities directly to investors' accounts, replacing the current method where brokers hold securities in a pooled account before passing those on to clients.

The initiative, which was implemented on February 25 under the guidance of the Securities and Exchange Board of India (Sebi), aims at enhancing efficiency, transparency and investor protection, the MIIs said in a statement.

By ensuring the seamless and direct credit of securities to clients' demat accounts, the mechanism strengthens market integrity and operational efficiency.

However, the direct-payout settlement was initially put on hold on November 12 last year, following some delays during the early beta phase.

Launched on November 11 last year, the beta phase aimed at improving the settlement process for investors.

While the new system has largely been successful, "certain delays" were observed in some cases during the beta phase, the MIIs had stated.

As a result, it was decided to temporarily move the direct-payout settlement to the erstwhile clearing member pool settlement mechanism effective November 12, 2024.