NISM Certifications · NISM-Series-VI: Depository Operations · Functions of Depository Participant - Trading and Settlement
A client sold shares and wants to deliver them before the normal pay-in date so the securities are blocked early, to be released when the trade settles. Which is correct about early pay-in?
In early pay-in, the client moves securities to the clearing corporation's designated account before the scheduled pay-in day, and they are later adjusted against the obligation at settlement. It works with demat securities and does not mean direct delivery to the buyer or freezing the entire account.
- AThe client transfers the securities to the clearing corporation's designated account before the pay-in day, and the clearing corporation credits them to the broker's obligation when the settlement is dueCorrect
- BEarly pay-in is possible only for securities held in physical form
- CEarly pay-in transfers securities directly to the buyer's account on the trade date
- DEarly pay-in means the DP freezes the whole account for the client
Explanation
Under early pay-in, securities are delivered ahead of the scheduled pay-in to the clearing corporation's designated account and are then used to meet the member's settlement obligation. It involves dematerialised securities, not physical ones, and the securities do not go straight to the buyer or freeze the entire account.
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