What is the pay in block mechanism in demat accounts?

In order to safeguard investors' funds and securities, SEBI has introduced a block mechanism and pay in validation procedure.
  • As per the new block mechanism, shares of a sale transaction will be blocked in your demat account in favour of the clearing corporation. There will be no movement of securities from your account for early pay in, or transfer back to your account in case the trade is not executed.
  • Similarly, the pay in validation ensures that shares are moved from your demat account based on verification of the transfer by your depository. A transfer instruction for a sale transaction is validated against the delivery obligation which is confirmed by the clearing corporation/exchange. If the obligations match, the sold securities are transferred.
  • Henceforth, if you submit a physical Delivery Instruction Slip (DIS) for markets trades, you will be required to submit additional details including- Trade Code, Trading Member ID, Stock Exchange ID.

For more information, view the SEBI circular.

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