Sebi extends deadline for margin obligations pledge framework on request by depositories

Sebi extends deadline for margin obligations pledge framework to October 10

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Market regulator Sebi has granted market intermediaries additional time to comply with the new framework on margin obligations through pledge and re-pledge of securities.

In a circular issued on August 18, the regulator said the revised mechanism - originally scheduled to come into effect from September 1, 2025 - will now be implemented from October 10, 2025.

Sebi had on June 3, 2025, issued a detailed circular mandating that all margin obligations in the equity and derivatives segment be fulfilled only through the depository system of pledges and re-pledges, a move aimed at plugging gaps in the existing process and ensuring greater safety of investors’ securities.

However, depositories CDSL and NSDL sought additional time and informed the regulator that significant system-level changes, testing of new processes and readiness of participants can take longer. Accepting their request, Sebi said the extension was being granted to ‘ensure smooth implementation without any disruption for market participants and investors’.

How the New System Works

The new pledge-and-re-pledge framework is designed to create a transparent, automated trail of client securities that are offered as collateral. Once invoked, a client’s securities will be blocked for early pay-in directly within their demat account, thereby reducing the possibility of misuse by brokers.

Another key feature is the introduction of a ‘pledge release for pay-in’ functionality. With this single instruction, the pledged securities can be released and a simultaneous pay-in block created in the client’s demat account. This eliminates the need for multiple instructions or manual intervention.

Depositories will be responsible for enabling the required infrastructure and functionality, Sebi had said. Once the framework goes live from October 2025, brokers will no longer need to seek separate physical or electronic instructions for un-pledging and delivery, and the system itself will validate and process the client’s pay-in obligations automatically.

Why it Matters

The initiative is part of Sebi’s broader efforts to strengthen investor protection and market transparency. Over the years, instances of brokers misusing client securities have highlighted risks in the margin funding process. By mandating that all pledges, re-pledges, and releases move through a controlled depository system, Sebi is aiming to curb erroneous practices while easing compliance for intermediaries.

With the new deadline set for October 10, all intermediaries, brokers and depositories have a little over seven weeks to test, adapt and fully align their systems with the regulator’s mandate.