MOHAMMAD ZIYAUDDIN
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Market Infrastructure Institutions (MIIs), which include stock exchanges, clearing corporations, and depositories, have successfully implemented the Direct Payout Settlement Mechanism for securities. This new system, introduced under the guidance of the Securities and Exchange Board of India (SEBI), aims to enhance efficiency, transparency, and investor protection.
What is the Direct Payout Settlement Mechanism?
Under the new system, clearing corporations will transfer securities directly to investors’ demat accounts.
This replaces the earlier process where brokers first held securities in a pooled account before distributing them to clients.
The move is designed to strengthen market integrity and improve operational efficiency.
When Was It Implemented?
- The direct payout mechanism was officially implemented on February 25, 2025.
- However, its launch was delayed due to technical issues during its beta phase.
- Originally launched on November 11, 2024, the system faced delays in some transactions, leading to a temporary suspension on November 12, 2024.
- After necessary improvements, it has now been successfully rolled out.
Why is This Important for Investors?
Faster & Transparent Settlements: Securities are credited directly to investors’ accounts, reducing settlement risks.
Eliminates Broker Dependency: Previously, brokers held securities temporarily, which added an extra layer of risk.
Stronger Investor Protection: Direct transfers reduce the chances of fraud or misuse of investor holdings.
What’s Next?
With the successful implementation of the direct payout mechanism, SEBI and MIIs will likely monitor its long-term impact on market efficiency. Investors can expect smoother transactions, reduced risks, and greater transparency in securities settlements.
