Investors to get block mechanism in Demat account for sale transactions: SEBI

After an active consultation with Depositories, Clearing Corporations (CC) and Stock Exchanges, the Securities Exchange Board of India (SEBI) has decided to provide 'Block Mechanism' in the Demat account of clients undertaking sale transactions.

To simply spell out SEBI's 'Block Mechanism' - when any client intends to make a sale transaction, shares will be blocked in the Demat account of the client in favour of Clearing Corporation. But, if the 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 mechanism would do away with the movement of shares from the client’s Demat account for early pay-in and back to the client's Demat account if the trade is not executed.

The move from the market regulator came after it received representations from the clients undertaking sale transactions, wherein the clients give Early Pay-In (EPI) for sale trades which are yet to be executed. Currently, if the sale trade gets executed, then securities get adjusted against EPI and if securities remain unsold, then the securities are required to be transferred to the client’s account. The existing process takes time and it also involves cost.