Attention! Here's what is changing with your shares, starting October 14,2024

Starting today, your shares will be directly credited to your demat account after you've executed a trade. This will significantly reduce the role of your stockbrokers like Zerodha, Groww, Angel One, and more. So, what does this change entail for you? We take a look.

What was the situation before?

Say you placed an order to buy 1,000 shares of company A through your stockbroker online today i.e. on Monday. The This will be your trade day, or T-day. The total transaction is worth Rs 1,00,000 (1,000 shares of Rs 100 each), plus Rs 120 worth of STT, brokerage charges and more, which brings the total to Rs 1,00,120.

First, your broker will ascertain whether or not you have this amount, or sufficient funds in your account for the trade to go through. Once that is verified, your broker will block this amount in your account and send you a contract note. This note details the day's transactions, along with the charges levied by the broker.

Since Indian markets operate on a T-day+1 settlement basis, here's what will happen with your order on T+1 day i.e. Tuesday:

1. The shares will be credited to your broker's pool account (Zerodha in this case) by the clearing corporation (CC). Also, the shares will start reflecting in your demat account the very same day.

2. The funds, which had been blocked in your account, will be debited from your broker's pool account, and will be credited to the selling broker's pool account.

Before today, the CC first transferred the securities into your broker's pool account, who then credited them to your account. The shares remained in the custody and control of your broker, before they finally transferred the same to your account.

What's changing?

Going ahead, the CC will directly credit the securities to your account, eliminating the role of the broker as a necessary intermediary. In short, the brokers will have no touchpoint with your shares. This change will be implemented in 2 phases:

Phase 1, which starts today, will enable direct credit of securities for equity cash segments, where big financial organizations or brokers undertake trades on behalf of their individual or institutional investors. This will also be applicable for physical settlements of futures and options. This means that on the date of their expiry, the actual delivery of stocks/commodities must be made to your demat account.

This will continue till January 13, 2025. However, in certain cases, like short delivery (when sellers do not deliver shares), rejected payouts, inactive buyer accounts and more, the securities will still be first credited to the broker's pool accounts.

Phase 2, which will begin from January 14, 2025, will extend this system to all security transactions, including even for SLB (securities lending and borrowing), where investors can lend or borrow securities from other participants in the market. The role of brokers will be largely be minimised.

This will also change how pledges, or loan against securities are created and managed in the markets. Currently, brokers are tasked with the job of creating pledges for unpaid securities, and marking them as the same. But post this change, brokers will request CCs to make these markings in the client's demat account.

Is there anything I need to do?

No, this is not set to impact the investor's experience in any way. If anything, it will make the entire share credit process smoother, more direct and secure.