SEBI eases margin pledge rules for securities: Key things traders should know

What has changed?

SEBI

now allows automated release and sale of pledged securities. Earlier, brokers had to first unpledge shares before delivering them, causing delays and manual steps.
The regulator observed that many such invoked shares remained unsold in brokers’ demat accounts, defeating the purpose of margin invocation.

Key changes traders should know:

One-step instruction:

If a client sells pledged shares, the new system will automatically release the pledge and block the same shares for delivery — in a single instruction.

This avoids the need for physical or digital signatures or use of Power of Attorney (PoA).

Automated settlement post-invocation:

When brokers invoke pledged securities (excluding mutual fund units not traded on stock exchanges), those securities will now be directly blocked for delivery from the client’s demat account, not retained in the broker’s margin account. This ensures faster settlement and a clear audit trail.

Limited to obligation:

The block on shares will be limited to the delivery obligation of the client, as validated by the clearing corporations. So, only what needs to be sold will be moved.

Why this matters?

These updates will improve transparency in margin trading and bring more efficiency to securities settlement. Investors and traders should check with their brokers about these changes and how it affects their trading accounts.