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New Delhi: Markets regulator Sebi will once more meet inventory brokers’ affiliation, depositories and clearing firms on Monday to analyse the readiness to implement the brand new guidelines on margin pledge from September 1, sources mentioned.
They additionally mentioned brokers will not be technically ready to roll out the proposed framework and are in search of a month’s extension to implement the identical.
This can be their third assembly with the Securities and Exchange Board of India (Sebi). The regulator has already met twice this month and mentioned the preparedness with the depositories (CDSL and NSDL), inventory brokers affiliation and clearing firms.
A member of inventory brokers’ affiliation Anmi mentioned it might be full catastrophe if the brand new system on pledge or repledge comes into impact from September 1.
The Association of National Exchanges Members of India (Anmi) includes round 900 inventory brokers from throughout the nation.
“There would be a total chaos in the market as a survey conducted by Anmi found that 90 per cent of brokers are not ready to start the new mechanism on pledge or repledge because of the pandemic,” the Anmi member mentioned.
Further, back-office distributors have clearly expressed their lack of ability to develop the brand new module and perform adjustments of their core utility which impacts pay in, payout, collateral administration and margin obligations.
The member additional mentioned brokers would find a way to handle it in case a month’s extension is granted by the capital markets watchdog.
Brokers mentioned their working capital administration will go haywire whereas implementing and complying with the brand new measures due to the time hole between launch and repledge.
Stock brokers are requesting for the simultaneous co-existence of the present techniques of title switch, and the proposed pledge system until September 30.
However, Sebi in July had mentioned that buying and selling members (TMs) or clearing members (CMs) ought to settle for shopper securities as collateral by means of title switch into the shopper collateral account as per the current system by August-end.
The regulator had allowed co-existence of the present title switch collateral mechanism and the brand new pledge and repledge course of until August 31 and had mentioned no additional extension will likely be granted.
Sebi had come out with the norms manner again in February, which was scheduled to come into impact from June 1. It was prolonged to August 1 and thereafter to September 1 after receiving representations from brokers relating to adjustments to the techniques and software program growth.
The new framework is geared toward guaranteeing security of buyers’ securities.
Under the framework, buying and selling members or clearing members would require to align their techniques and settle for shopper collateral and margin-funded shares by means of creation of pledge and repledge within the depository system.
Depositories ought to present “margin pledge” for pledging shoppers’ securities as margin to the TM or CM. The latter ought to open a separate demat account for accepting such margin pledge, which needs to be tagged as “client securities margin pledge account”.
To present collateral within the type of securities as margin, a shopper will likely be required to pledge securities with TM, and TM will repledge the identical to CM, and CM in flip will repledge the identical to clearing company.
The full path of such repledge will likely be mirrored within the demat account of the pledgor.
This story has been printed from a wire company feed with out modifications to the textual content.
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