'If implemented...': Zerodha co-founder Nithin Kamath lauds Sebi's plan for client securities

Sebi is mulling direct payout of securities to clients’ demat accounts by clearing corporations, a move aimed at protecting client securities.  Sebi has sought public comments on the plan by May 30.

"This consultation paper, if implemented, significantly simplifies the DP operations of stock brokers. Today, when a client buys stock, it gets credited to the broker pool account, and then the broker credits it to the customer. In the new way proposed, the shares will get directly credited to the customer's demat," Zerodha co-founder Nithin Kamath said in a post on X. 

"Even without this regulation, we're probably the safest financial market in terms of the security of customer assets, given that everything is in the customer's own demat. This regulation will further enhance that," he further added.

The process at present is voluntary. “In a move to enhance operational efficiency and reduce the risk to clients’ securities, it has been deliberated to make the process of direct payout of securities to the client account mandatory,” Sebi in its proposal. 

Clearing corporations should provide a mechanism for trading member(TM)/clearing member (CM) to identify the unpaid securities and funded stocks under the margin trading facility. In case of shortages "arising due to inter se netting of positions between clients", the TM or CM should handle such shortages through the process of auction, Sebi suggested, adding that brokers should not levy any charges on the client over and above what's put by clearing corporations.