Sebi is considering direct distribution of securities to clients' demat accounts by clearing businesses as a measure to protect client securities. Sebi has invited public feedback on the idea by May 30.
"If implemented, this consultation paper will greatly simplify stock brokers' DP operations. When a client buys stock today, it is deposited to the broker pool account before being credited to the consumer by the broker. In the new proposed method, the shares will be instantly credited to the customer's demat account," Zerodha co-founder Nithin Kamath stated in a post on X.
"Even without this law, we are probably the safest financial market in terms of consumer asset protection, because everything is held in the customer's own demat account. This regulation will only strengthen that," he continued.
Currently, the process is voluntary. "In a move to enhance operational efficiency and reduce the risk to clients' securities, it has been deliberated to make the process of direct payout of securities to the client account mandatory," Sebi stated in its recommendation.
Clearing corporations should provide a way for trading members (TMs) and clearing members (CMs) to identify unpaid securities and funded stocks under the margin trading facility. Sebi proposed that in the event of shortages "arising due to inter se netting of positions between clients," the TM or CM should address such shortages through the auction process, and that brokers should not collect any expenses on the client in excess of what clearing organizations impose.
