Update 08 Nov 2024

SEBI’s new rules for direct payout of securities: What’s changing?

If you are an active investor in the stock markets, then you know a lot has changed in how stocks are settled in India. Here’s a new change that you should know about🧵👇

Until November 7, 2024, when you bought shares for delivery, on the T+1 day, the Clearing Corporation (CC) would credit those shares to the broker’s pool account. By the end of the day, the broker credited the shares to your demat account.
Going forward, the Clearing Corporation will now directly credit these shares to your demat account, skipping the need for a broker to settle your shares.

Why does this matter?

When you buy a share, the CC credits it to the broker’s pool account on T+1. While most brokers will credit shares to your demat account on T+1 itself, by design, brokers are allowed time till T+2 to credit the shares. With Direct Payout, you can expect shares in your demat account on T+1.
The new settlement system makes the CC responsible for debiting/crediting shares from/to your demat account.

Does this diminish the broker’s role?

This simplifies the broker’s responsibilities as it will no longer have to upload pay-in/payout instructions to the CC.

The broker will still be responsible for ensuring the accurate and timely reporting of client trades, managing clients’ margin trades, verifying all direct payouts, and addressing any discrepancies in the direct payout process.

What if you have multiple demat accounts?

Where will the CC payout the shares? The primary demat account mapped with your trading account at the stock exchange will receive the credit.

As a client, your trading and investing experience will not change. But there is one change. Earlier, if you bought shares using Margin Trade Funding (MTF), you needed to authorize the pledging of shares via an OTP. This is no longer needed, making the experience a lot smoother.

You can check out this post for more details.

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