Stock exchanges roll back direct payout of securities to client accounts

Faced 'slight delays' in some cases, claim exchanges in a joint statement

The National Stock Exchange (NSE) and BSE on Tuesday announced the rollback of the direct payout of securities to client demat accounts, which was enabled on November 11.

 

The exchanges stated that there have been ‘slight delays’ in some cases, leading to the postponement of the direct payout facility.

 

The market regulator, the Securities and Exchange Board of India (Sebi), had earlier postponed the implementation date to November 11 from the initial date of October 14, following representations from market infrastructure institutions (MIIs) including exchanges, depositories, and clearing corporations.

 

While the facility was launched on Monday, it is now being postponed due to these issues.

 

“While the move has been broadly successful, there are slight delays in some cases where the MIIs are working jointly to resolve and stabilise the ecosystem over the next few days,” said the NSE in a notice.

 

“In view of this, the implementation of securities payout directly to clients’ demat accounts stands postponed, and the go-live date will be announced subsequently,” it added.

 

At present, securities are credited to the broker and then transferred to the demat account of the investor by the broker. With the changes, securities will be directly credited to the investor’s demat account, reducing the role of the broker who has held the shares until the time of transfer.

 

The previous extension was provided because the operational guidelines from clearing corporations were issued at the end of August, instead of the earlier timeline of August 5.

 

The market regulator also revised the timing of the payout from 1:30 pm to 3:30 pm under Phase-I of the implementation, which covers the equity cash segment.

 

The direct payout enhances safety for clients as it reduces the role of stock brokers and limits their access to clients' securities. The market regulator has taken several measures to mitigate risks following incidents like that of Karvy.