Block Mechanism in demat account of clients undertaking sale transactions
Summary
SEBI introduces an optional block mechanism in clients' demat accounts to facilitate early pay-in for sale transactions without physically moving securities. This mechanism allows shares to be blocked in favor of the Clearing Corporation, deeming margins collected and avoiding penalties for short or non-collection. The process involves specific steps for blocking, matching obligations, and unblocking securities on T day if trades remain unmatched.
Text
if Early Pay-In (EPI) of securities has been made to the Clearing Corporation (CC), then all margins would deemed to have been collected and penalty for short /non-collection of margin including other margins shall not arise.
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.
The securities lying in client’s demat account will be blocked either by client himself using depository’s online system or eDIS mandate or through depository participant based on physical DIS given by client or Power of Attorney (POA) holder.
Depositories may keep block on the securities in client’s demat account in respect of Intra or Inter depository transfer instruction till pay-in day. The blocked securities will be transferred only after checking against the client level net delivery obligation received from CCs.
Depositories will provide the details of transfer instructions viz., UCC, TM ID, Exchange ID etc. to CCs for clients to avail EPI benefit.
CC will match the client level net obligations with the Block details provided by depositories and CC will provide EPI benefit to client if the client level net obligation exists for that client.
In case of matched orders, block securities will be debited from Client’s demat account and will be credited to linked TM Pool account upto pay-in day. TM shall further transfer such securities to CM Pool account.
TM shall not transfer the securities to any other pool account other than CM pool account mapped to the TM account. Pool to Pool transfers except TM pool to CM pool shall not be permitted.
Inter-settlement shall not be allowed from TM Pool account and CM pool account.
Securities lying in CM pool account will be delivered in settlement process on the Pay-in date. If TM Pool Account is also mapped as a CM Pool Account, then, securities lying in such TM/CM Pool Account can also be delivered in the settlement process.
After receiving client level net obligations on T day from CCs, depositories will match the Intra or Inter depository transfer instruction details with CC obligation details based on UCC, TM ID, CM ID, Exchange ID, etc.
In case of unmatched orders, CCs shall upload cancellation of Block instruction on T day so that securities are unblocked and become free in client’s demat account on T day itself.
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Source: SecMarx — Block Mechanism in demat account of clients undertaking sale transactions. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.