On Jul. 1, 2025, IND CDSL said it will implement automated process for unpledge, invocation, sale of pledged securities to enhance investor protection and efficiency.
IND CDSL explained that pledge release for early pay-in (PR-EP) allows trading members (also referred to as TMs) to release pledged securities with no client dues via a single instruction, for full/partial quantity, by 9:45am on T+1.
Invocation for early pay-in (IV-EP) allows TMs to sell and invoke pledged securities (excluding mutual funds) via a single instruction, with the same rules as PR-EP.
Invocation for redemption (IV-RD) is used to redeem off-exchange mutual fund units via invocation, MF RTA; proceeds credited to TM/clearing member (CM) bank accounts.
As for invocation for restricted clients, if client trading is restricted post-pledge, TMs or CMs can invoke, sell securities under proprietary code; pay-in must occur same day.
Above-mentioned facility is effective from Sep. 5, 2025; live release on Sep. 4, 2025.
On same day IND NSD enclosed, at annexure A, operational guidelines re margin obligations to be given by way of pledge/re-pledge in the depository system (DS) for implementation of necessary guidelines mentioned in the Jun. 3 SEBI circular above.
Aforesaid changes will be implemented in IND NSD DS at end of day of Sep. 5, 2025.
On Feb. 12, IND SEBI proposed measures to prevent risk of misuse.
IND SEBI mandated brokers to accept collateral from clients only through margin pledge mechanism to prevent misappropriation or misuse of client securities.
Follows IND SEBI Feb. 2020 updated on pledge margin under depo system, #72619.
Risk of Misuse
IND SEBI said it has been observed that when client securities pledged in favor of brokers' demat accounts (client securities margin pledge account/client securities under margin funding account) are invoked, brokers do not sell them on the same day.
This leads to accumulated client securities in brokers' demat accounts, risking misuse.
In order to mitigate the risk of misuse, the IND SEBI proposes blocking the securities in the client’s demat account for early pay-in immediately upon invocation.
Operational Challenges
When client sells pledged securities, process involves two steps, first un-pledging the securities and then pay-in of securities; brokers have reported operational challenges.
IND SEBI proposes introducing single instruction mechanism called pledge release for pay-in, which allows pledge to be released, pay-in block to be set up simultaneously.
Consultation End
Comment period of this consultation closed on Mar. 4, 2025.
Jun. 2025 Amendments Finalized
On Jun. 3, 2025, IND SEBI published circular in order to finalize rules with respect to the consultation discussed above; the circular is addressed to all recognized stock exchanges, all recognized clearing corporations, as well as all depositories.
Relates to IND SEBI Aug. 2024 issued master circular for stock brokers, see #213116.
Provisions of the Jun. 3, 2025 circular above will take effect from Sep. 5, 2025; and detailed operating guidelines shall be specified by depositories on/before Jul. 1, 2025.
Jul. 2025 Margin Obligations
On Jul. 1, 2025, IND CDSL said it will implement automated process for unpledge, invocation, sale of pledged securities to enhance investor protection and efficiency.
IND CDSL explained that pledge release for early pay-in (PR-EP) allows trading members (also referred to as TMs) to release pledged securities with no client dues via a single instruction, for full/partial quantity, by 9:45am on T+1.
Invocation for early pay-in (IV-EP) allows TMs to sell and invoke pledged securities (excluding mutual funds) via a single instruction, with the same rules as PR-EP.
Invocation for redemption (IV-RD) is used to redeem off-exchange mutual fund units via invocation, MF RTA; proceeds credited to TM/clearing member (CM) bank accounts.
As for invocation for restricted clients, if client trading is restricted post-pledge, TMs or CMs can invoke, sell securities under proprietary code; pay-in must occur same day.
Above-mentioned facility is effective from Sep. 5, 2025; live release on Sep. 4, 2025.
On same day IND NSD enclosed, at annexure A, operational guidelines re margin obligations to be given by way of pledge/re-pledge in the depository system (DS) for implementation of necessary guidelines mentioned in the Jun. 3 SEBI circular above.
Aforesaid changes will be implemented in IND NSD DS at end of day of Sep. 5, 2025.
