SEBI introduces Block Mechanism in demat account for sale transaction
After extensive consultations with Depositories, Clearing Corporations and Stock Exchanges, SEBI has issued a circular to provide a mechanism of block in the demat account of clients undertaking sale transactions. When the client intends to make a sale transaction, shares will be blocked in the demat account of the client in favour of Clearing Corporation. If sale transaction is not executed, shares shall continue to remain in the client’s demat account and will be unblocked at the end of the T day. Thus, this mechanism will do away with the movement of shares from client’s demat account for early pay-in and back to client’s demat account if trade is not executed.
Vide SEBI Circular dated 16th July, 2021, Depositories have been advised to make the facility of block mechanism available to the clients by August 01, 2021 and to inform their participants of the step by step guide for block mechanism. Depositories and Clearing Corporation (CC) shall put in place an appropriate system by participants / members to make available the Block Mechanism for clients in the securities market.
This move has been initiated by SEBI on receipt of representations from the clients undertaking sale transactions, wherein the clients give Early Pay-In (EPI) for sale trades which are yet to be executed. If the sale trade is executed, then the securities get adjusted against EPI, however, if securities remain unsold, then the securities are required to be returned back to client’s demat account, which take time and involve cost.
Above stated SEBI Circular can be accessed at folowing link:
SEBI/HO/MIRSD/DOP/P/CIR/2021/595 dated July 16, 2021