Physical delivery of demat shares allowed

The idea behind allowing delivery of demat shares in the physical segment is to provide an exit route to investors till such time liquidity in the demat segment parallel’s that of the physical segment.

It is felt that a number of investors are not dematerialising their holdings for want of adequate liquiditywhich might lead to them being saddled with a chunk of demat shares. Now the investor would have the option of selling his stock in the physical segment.

The clearing mechanism would be structured in such a way that the lot of demat shares that arrive at the clearing house would be allotted to the institutions who have to compulsorily trade in demat shares in a few securities as of now.

The market regulator expects this to be in effect from April 6 and has asked both the NSE and the BSE, the clearing houses to work out all the modalities till then. Initially, only the 8 securities shortlisted for compulsory institutional trading would have this facility.

The clearing houses will also have to work out the netting out process of segregating the physical and the electronic shares. According to Sebi chairman, D R Mehta, this move would increase volumes in the demat segment.