NEW DELHI : Markets regulator Sebi has refused to extend the Sept. 1 deadline to implement the new rules on margin commitment, brokerage association Anmi said on Monday.
The new mechanism aims to provide transparency and prevent brokerage houses from misusing client securities.
The decision was made after Sebi’s meeting with the association of stockbrokers, depositories and clearing houses. The meeting was held to discuss readiness to implement the new standards.
Sebi had submitted the rules in February and it was scheduled to go into effect on June 1. It was extended to August 1 and then to September 1.
According to sources, the regulator has refused to extend the September 1 deadline, as depositories are ready to implement the new mechanism.
However, the National Stock Exchanges Members Association of India (Anmi), a grouping of around 900 stockbrokers from across the country, urged Sebi on Friday to extend the implementation of the new margin commitment mechanism by one month. until September 30, citing various challenges. faced by market participants.
Furthermore, the back office provider group has not given 100 percent authorization to members to start the new process, he added.
“At today’s virtual meeting, Sebi refused to grant an additional time extension to implement the margin / replenishment commitment process. This was a big surprise to Anmi and its 900 members. Anmi is holding back-to-back meetings with all parties. interested and studying all available options in the matter, “said an Anmi spokesman.
The brokers association had requested the coexistence of the current title transfer systems and the proposed pledge system until September 30.
However, the Securities and Exchange Board of India (Sebi) had said in July that trading members (TM) or clearing members (CM) can accept securities from clients as collateral by transfer of title to the escrow account of the client according to the current system until August-final.
The regulator had allowed the current title transfer guarantee mechanism and the new pledge and new pledge process to coexist until August 31 and had said no further extension would be granted.
Tejas Khoday, co-founder and CEO of Fyers, said: “The new engagement mechanism will bring much-needed transparency and prevent brokerages from misusing client securities.”
As a result of Sebi’s refusal to extend the term, traditional brokerages with legacy systems will face huge operational challenges that may cause chaos and unintended consequences in the near future, he added.
Under the framework, trading members or clearing members will need to align their systems and accept the customer guarantee and margin-funded actions by creating a pledge and a new pledge in the escrow system.
Depositaries must provide “margin guarantee” to pledge clients’ securities as margin for the TM or CM. The latter must open a separate demat account to accept such a margin commitment, which must be labeled “Client Securities Margin Commitment Account”.
To provide collateral in the form of securities as margin, a client must pledge the securities with TM, and TM will pledge them again with CM, and CM, in turn, will pledge them again to the clearing corporation.
The full trace of such a new promise will be reflected in the demat account of the pledgee.
This story was published from a news agency feed with no changes to the text.
.
