CIRCULAR
SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/82 June 03, 2025
To,
All Recognized Stock Exchanges
All Recognized Clearing Corporations
All Depositories
Madam / Sir,
Sub: Margin obligations to be given by way of Pledge/Re-pledge in the
Depository System
1. SEBI, vide circular SEBI/HO/MIRSD/DOP/CIR/P/2020/28 dated February 25, 2020
(hereinafter mentioned as ‘Circular’) and Para 41 of Master Circular for Stock
Brokers dated August 09, 2024 (hereinafter mentioned as ‘Master Circular’),
mandated that the broker shall accept collateral from client in the form of securities
only by the way of ‘margin pledge’. The operational mechanism for initiation,
release and invocation of margin pledge is provided at Annexure A of the circular
and para 41.11 of the Master Circular.
2. It has come to notice that after invocation of client’s securities pledged in favor of
demat account of brokers (i.e. ‘Client Securities Margin Pledge Account’ or ‘Client
Securities under Margin Funding Account’), such invoked shares are lying unsold
resulting into the accumulation of clients’ securities in demat account of the broker.
The said accumulation does not serve the purpose for which securities were
invoked i.e. realization of moneys.
3. Further, Brokers’ Industry Standard Forum (Brokers’ ISF) highlighted operational
difficulties of brokers where clients sell the pledged securities. In the current
process, broker has to first un-pledge the securities sold by the client and thereafter
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securities are delivered to Clearing Corporation by broker using physical instruction
or electronic instruction or DDPI/POA.
4. Based on the aforesaid observation/representation of Brokers’ ISF and with a view
to facilitate ease of doing business as well as to safeguard the interest of investors,
it has been decided to make the invocation and sale as a combined automated
process. For this, the below given clauses are inserted in Annexure A of circular
dated February 25, 2020 and Master circular for stock brokers:
a. Point 9 (in Annexure A of the circular dated February 25, 2020) and Para
41.11.9 (Master circular for stock brokers):
In case where client sells the securities, which are pledged in favor of TM/CM
as Margin pledged securities (including pledged funded stock) / CUSPA pledge,
depositories shall provide a functionality of single instruction in the form of
‘Pledge release for early pay in’ to TM/CM wherein pledge will be released and
early pay in block will be set up immediately in client demat account subject to
pay in validation i.e. only to the extent of delivery obligation of that client as
provided by CCs to depositories without the need for physical instruction or
electronic instruction or DDPI/POA.
b. Point 16 (in Annexure A of the circular dated February 25, 2020) and Para
41.11.16 (Master circular for stock brokers):
In case of invocation of margin pledged securities (including pledged funded
stock) of client by Trading member (TM), the invoked securities, other than
mutual fund units that are not traded on the exchanges, shall be blocked for
early pay-in in the client’s demat account with a trail being maintained in
TM/CM’s ‘Client Securities Margin Pledge Account’ / ‘Client Securities under
Margin Funding Account’. The pay in block in client’s demat account shall be
subject to pay in validation i.e. only to the extent of delivery obligation of that
client as provided by CCs to depositories.
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In case of invocation of Mutual fund (MF) units that are not traded on the
exchange, depositories shall provide a functionality of single instruction in the
form of ‘invocation cum redemption’ wherein invoked MF units will come to the
TM/CM’s ‘Client Securities Margin Pledge Account’, and go for auto redemption
from the said account.
In scenarios, where client’s trading account is frozen or client trading codes are
marked as ‘Not permitted to trade’ or equivalent at the stock exchanges
subsequent to creation of pledge, the invoked securities will come to demat
account of TM/CM and the same shall be sold by TM/CM under the proprietary
code. In order to prevent the accumulation of client securities in the demat
account of TM/CM, it must be ensured by TM/CM that pay-in of securities is
done on the same day of invocation.
5. Accordingly, Annexure A of SEBI Circular SEBI/HO/MIRSD/DOP/CIR/P/2020/28
dated February 25, 2020 and Para 41 of Master Circular for Stock Brokers dated
August 09, 2024 stand amended to the extent of para 4 as detailed above. All other
provisions specified in SEBI Circular dated February 25, 2020 and SEBI Master
Circular for Stock Brokers dated August 09, 2024 shall continue to remain
applicable.
6. The provisions of this circular shall come into force with effect from September 05,
2025.
7. The detailed operating guidelines shall be specified by depositories on or before
July 01, 2025.
8. The Stock Exchanges, Clearing corporations and Depositories shall:
8.1. bring the provisions of this circular to the notice of their members and also
disseminate the same on their websites;
8.2. make necessary amendments to the relevant Bye-laws, Rules and Regulations
for the implementation of the above direction;
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9. This circular is issued in exercise of powers conferred under Section 11(1) of
Chapter IV of the Securities and Exchange Board of India Act, 1992 read with
Regulation 30 of Chapter VII of SEBI (Stock Brokers) Regulations, 1992 to protect
the interests of investors in securities and to promote the development of, and to
regulate the securities markets.
10. This circular is available on SEBI website at www.sebi.gov.in under the category:
‘Legal → Circulars.
Yours faithfully,
Aradhana Verma
General Manager
Tel. No. 022-26449633
E-mail: aradhanad@sebi.gov.in
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