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Depositories, clearing corps say new margin pledge process ‘fairly stabilized’

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Mumbai: Depositories and Clearing Corporations on Monday assured investors that the new margin pledge process was now fairly stabilized. Clearing Corporations along with the brokers had been grappling with the chaos triggered by the implementation of the new norms on pledging and unpledging of shares introduced by the Securities and Exchange Board of India (Sebi).

“Significant amount of margin pledges/repledges continue to be processed seamlessly since September 1, 2020. The new margin pledge process has now been fairly stabilized,” Central Depository Services India (CDSL), National Securities Depository (NSDL), Indian Clearing Corp and NSE Clearing said in a joint statement.

Last week, these entities had said they expected the process to stabilize this week.

The rules on share pledging were introduced on September 1 after the Securities and Exchange Board of India (Sebi) rejected brokers’ demand to postpone them.

The markets regulator recently introduced a rule that investors must bring in upfront margins — a deposit — for every trade they do. Margins can be in the form of cash or idle shares lying in the demat account that would be pledged.

Until recently, brokers took a Power of Attorney (PoA) from clients — individual investors — that allowed them access to the clients’ demat account. This allowed brokers to move the shares to a separate account for the purpose of collateral.

With Sebi banning the use of PoA for this purpose because of misuse of inactive demat accounts by some brokers, clients now have to pledge the shares directly with the systems of the depositories — NSDL and CDSL — in favour of the broker.

Last week, chaos prevailed as brokers said the older share collaterals of several clients were removed and they were pledged afresh to comply with the new norms but these were not reflected in the systems.

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