Brokers to meet SEBI today amid unease over new pledging norms

SEBI will meet brokers on Tuesday to hear from them on difficulties in implementing the new margin and share pledging norms that will be effective from September.

Brokers want SEBI to postpone the new regime on pledging and re-pledging of shares as they are of the view that the share depository system is not updated yet, sources told Business Line.

Earlier, there was no requirement of upfront margin to be paid for buying and selling of stocks in the cash segment. That will change from September and at least 30 per cent upfront margin is required even in the cash segment. Also, SEBI has ordered discontinuation of the system where brokers used power of attorney (PoA) for pledging and re-pledging of shares.

Brokers used shares as margin and as PoA was issued to them by clients, they transferred their shares from one account to another. This use of PoA for creation pledge to account for initial trading margin, has been discontinued. Instead, SEBI has said that brokers should create a legal pledge of share based on specific instructions. This creation and revocation of pledge attracts charges from the depository players (DPs) like Central Depository Services Ltd and National Services Depository Ltd and has to be borne by clients.

Difference over mapping

A leading member of the broker association said that clearing corporations of stock exchanges and depository participants differ on mapping of the UCC (unique client code) of a broker, who also clears the client trade.

“There are several brokers who are associated with two depositories and one of them is not ready to accept a separate UCC that is being given by the clearing corporation to the broker. In simple terms, a proper mapping of the UCC is not being effectively done ,” the association member said.

UCC is nothing but just an identification number issued to a broker by an exchange clearing arm that settles the trade. In the new regime this UCC will have to be matched by the clearing corporation and depository participants for pledging and re-pledging of shares.

A source close to NSDL said their systems are working just fine and there is no issue. Earlier SEBI had extended the deadline for implementation of the new norms. It is unlikely that the regulator will delay the implementation of the norms any further, sources said.

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