Latest News | Anmi Urges Sebi to Extend Margin Pledge System Implementation Till Sep 30

New Delhi, Aug 28 (PTI) Stock brokers' association Anmi on Friday urged markets regulator Sebi to extend the implementation of the new mechanism on margin pledge by one month till September 30, citing several challenges faced by market participants.

The new mechanism is scheduled to come into force from September 1.

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Meanwhile, sources said the regulator will meet stock brokers' association, depositories and clearing corporations on Monday to analyse readiness to implement the new rules on margin pledge.

In its letter written to Sebi, Anmi has cited several concerns in implementing the new mechanism, including UCC (unique client code) mismatch issue and difficulties in uploading instruction.

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Besides, back-office vendors group has not given 100 per cent clearance to members to launch the new process with absolute confidence to their technical satisfaction, the letter said.

In addition, most members said their systems are at premature stages of login and reconfirmed that repledge could not be initiated at all in both the depositories -- CDSL and NSDL, it noted.

Association of National Exchanges Members of India (Anmi), a grouping of around 900 stock brokers from across the country, said that the margin pledge process is yet incomplete.

"The implementation of the new system, if not postponed, is likely to result in market disruption, as operations at the depositories have not stabilised besides there is mismatch noticed in UCC database, which is required to be corrected before the process is started and if it is not attended on priority it is likely to hamper the process of smooth pledging / repledging of shares.

"We believe that more damage would be caused to investors' confidence and disruption in market from September 2020 if the implementation is not postponed," Anmi said.

It further said vigorous testing of the system should be done prior to final implementation.

In the light of challenges that exist, Anmi appealed that brokers should not be held responsible for the alleged shortfall in margin reporting and likely penalties levied.

Accordingly, the stock brokers association has sought further one-month time for implementation of new system of margin pledge / repledge process, including penalties provision.

Also, it urged that the present system of shares deposited in the collateral account of clients to continue till another month simultaneously, so that smooth transition may take place in due course of extended time.

The body said that depositories should issue frequently asked questions or instructions manual on effective implementation of the new system.

Sebi in July had said that trading members (TMs) or clearing members (CMs) to accept client securities as collateral by way of title transfer into the client collateral account as per the present system by August-end.

The regulator had allowed co-existence of the current title transfer collateral mechanism and the new pledge and re-pledge process till August 31 and had said no further extension will be granted.

Sebi had come out with the norms way back in February, which was scheduled to come into effect from June 1. It was extended to August 1 and thereafter to September 1 after receiving representations from brokers regarding changes to the systems and software development.

The new framework is aimed at ensuring the safety of investors' securities.

Under the framework, trading members or clearing members will require to align their systems and accept client collateral and margin-funded stocks by way of creation of pledge and re-pledge in the depository system.

Depositories should provide "margin pledge" for pledging clients' securities as margin to the TM or CM. The latter should open a separate demat account for accepting such margin pledge, which should be tagged as "client securities margin pledge account".

To provide collateral in the form of securities as margin, a client will be required to pledge securities with TM, and TM will re-pledge the same with CM, and CM, in turn, will re-pledge the same to clearing corporation.

The complete trail of such re-pledge will be reflected in the demat account of the pledgor.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)