Market regulator Securities and Exchange Board of India (SEBI) has decided to introduce block mechanism in demat account of clients undertaking sale transactions from 1 August 2021. With the block mechanism, the time to return securities back to client's demat account would be reduced.
In a release SEBI says, "Clients give early pay-in (EPI) for sale trades which are yet to be executed. If the sale trade is executed, then the securities get adjusted against EPI, however, if securities remain unsold, then the securities are required to be returned to client's demat account, which take time and involve cost."
A facility of block mechanism in the demat account of clients has been made available by the depositories. Under this facility, securities lying in client's demat account may be blocked in favour of clearing corporation either by client himself using depository's online system or electronic delivery instruction slip (eDIS) mandate or through depository participant based on physical DIS given by client or power of attorney (POA) holder.
"Clearing corporation will match the client obligations with the block details provided by depositories and will provide EPI benefit to client if the obligation exists for that client. If the order is not executed by the end of the trade (T) day, the block should be released. The proposed facility of block mechanism is on optional basis and EPI mechanism shall continue," SEBI says.
Further, SEBI says, if securities for sale are blocked in the depository system in favour of clearing corporation, all margin would have deemed to have been collected and penalty for short or non-collection of margins including other margins should not arise.
The facility of block mechanism will be available to the clients from 1 August 2021.