Sebi extends securities-transfer timeline under T+1 to enable direct payout

The direct-payout system was announced by the regulator through a circular issued on June 5, 2024; it is yet to roll out

The market regulator has made one more change to the Direct Payout system to ensure that securities under the T+1 settlement system are deposited into the clients' account on T+1 day. T is the day the trade is taken and T+1 is the next day when the money or securities comes into the client's account.

Under the Direct Payout system, the clearing corporations (CCs) directly transfers the securities to the investors' account; this new system is yet to roll out. The regulator has extended the time given to the CCs to transfer securities to investors' account from 1.30 pm to 3.30 pm.

With this, the securities will be credited to the investors' demat account on on the same trading day instead of one working day from the receipt of pay-out from the exchange, said the circular issued by the Securities and Exchange Board of India (Sebi) on October 10. That is, the securities will be credited to the client's account on the very day that the exchange makes the pay out (T+1) and not on T+2, which has been happening under the current system with a few brokers since they have been given an additional grace period of 24 hours from T+1 to do the payout.

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The direct-payout system was announced by the regulator through a circular issued on June 5, 2024. This system was introduced to "to protect clients’ securities and to ensure that the stock broker segregates securities of the client or clients so that they are not vulnerable to misuse". Thus, the system of pooling of the securities by the brokers who would then credit them to the clients' account will be stopped.

The latest circular now shortens the timeline for this securities transfer in the T+1 rolling settlement under the direct payout system.

The circular has has said that the master circular issued to stock brokerages and clearing corporations on October 16, 2023, also stands revised to accommodate this new schedule.