{"id":392334,"date":"2024-10-07T20:14:58","date_gmt":"2024-10-07T14:44:58","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=392334"},"modified":"2025-02-24T17:12:24","modified_gmt":"2025-02-24T11:42:24","slug":"sebis-new-rules-for-direct-payout-of-securities-whats-changing","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/business-updates\/sebis-new-rules-for-direct-payout-of-securities-whats-changing","title":{"rendered":"SEBI\u2019s new rules for direct payout of securities: What\u2019s changing?"},"content":{"rendered":"\r\n

Update: <\/strong>Starting February 24, 2025, the clearing corporation has implemented direct payout of securities that allows credit of shares directly to your demat account. As a result, you will no longer be required to authorise your MTF purchases with the CDSL OTP. Read more<\/a><\/p>\r\n

The Securities and Exchange Board of India (SEBI) has <\/span>introduced guidelines<\/span><\/a> that will change how securities are credited to investors’ demat accounts. Currently, securities are credited to the broker, who then transfers them to the investor. Under new rules, securities will be directly credited to the investor’s demat account, making the process more efficient. These changes will happen in two phases starting on October 14, 2024. Here is an overview of what\u2019s changing, how these changes will impact investors and brokers, and what to expect as the new regulations are rolled out:<\/span><\/p>\r\n

How securities are currently credited to an investor’s demat account<\/b><\/h3>\r\n

When securities are bought, the Clearing Corporation (CC) first credits them to the broker\u2019s pool account, after which the broker transfers the securities to the buyer\u2019s demat account. Until this transfer is made, the broker holds control of the securities.<\/span><\/p>\r\n

Another method called “direct payout for net settlement,” and here\u2019s how it works:<\/span><\/p>\r\n

    \r\n\t
  1. If the broker has 1,000 buyers and 500 sellers, 500 buyers are matched with 500 sellers, and the CC credits the shares directly to the remaining 500 buyers.<\/span><\/li>\r\n\t
  2. If 100 of the sellers <\/span>fail <\/span>t<\/span>o deliver the shares<\/span>, i.e., the shares are <\/span>short delivered<\/span><\/a>, the broker must either acquire them from the market or participate in an auction.<\/span><\/li>\r\n\t
  3. If the shares cannot be obtained through the auction, the settlement is completed at a <\/span>close-out rate<\/span><\/a>.<\/span><\/li>\r\n<\/ol>\r\n

    Due to these complexities, Zerodha does not use the net settlement method.<\/span><\/p>\r\n

    How SEBI\u2019s guidelines will change the process<\/b><\/h3>\r\n

    The guidelines will be rolled out in two phases and will reduce the broker\u2019s role by allowing the CC to directly credit securities to investors\u2019 accounts.<\/span><\/b><\/p>\r\n