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Depositories, Clearing Corps say new margin pledge process now stabilized

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Mumbai: Depositories and Clearing Corporations on Tuesday said the transition to the new margin pledge process has stabilized, assuaging concerns of investors and brokers who have been trying to embrace the the new norms on pledging and unpledging of shares introduced by the Securities and Exchange Board of India (Sebi), which became effective from September 1.

“The transition to a new margin pledge process with a significant amount of margin pledges / repledges has now stabilised. Settlements for today have been completed seamlessly in time,” Central Depository Services India (CDSL), National Securities Depository (NSDL), Indian Clearing Corp and NSE Clearing said in a joint statement.

On Monday, these entities had said the new margin pledge process had fairly stabilized.

The new rules on share pledging were effective from September 1, after the markets regulator rejected brokers’ demand to postpone them. Sebi 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.

In the 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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