Under the proposed “block mechanism”, shares of a client intending to make a sale transaction will be blocked in their demat account in favour of the clearing corporation concerned.
If the sale transaction is not executed, then shares would continue to remain in the client’s account and would be unblocked at the end of the T (trade) day.
At present, clients give early pay-in (EPI) for sale trades, which are yet to be executed.
If the sale trade is executed, then the securities get adjusted against EPI. However, if securities remain unsold, then the securities are required to be returned back to client’s demat account, which take time and involve cost. The regulator said the proposed facility of block mechanism would be allowed on an optional basis to investors and EPI mechanism would also continue.