Technical glitch at NSDL delays settlement of trades since Tuesday

Synopsis

A technical problem at the National Securities Depository disrupted stock settlement for three days. The shares purchased by investors do not appear in their demat accounts. This prevents them from selling these assets. The problem stems from NSDL’s inability to process inter-custodian transfers. This has an impact on routine movements of securities between depositories. Operations are therefore delayed.

ETMarkets.comMumbai: A technical problem National securities depository (NDL) resulted in a delay in the settlement of trades executed in the last three days. Shares purchased by several investors associated with the depository since Tuesday are yet to reflect in their demat accounts, preventing them from selling these holdings, officials at several brokerages said on Thursday.

The probable cause is a technical disruption within NSDL that affected its ability to process inter-depository transfers with his biggest rival, CDSL. Since several trade settlements often require securities to be transferred between the two custodians – a routine process, any glitch in NSDL’s inter-custodian routing hampers crediting of shares to individual clients’ dematerialized accounts.

As a result, the securities were credited to the broker pool accounts but were not allocated to the end investors’ dematerialized accounts, leaving clients temporarily unable to trade these holdings, sources said.

“This is not an isolated case; customers of all brokerage firms are facing problems due to the inter-depository transfer issue emanating from NSDL,” said the head of a brokerage house on condition of anonymity.

Although brokers have not reported similar settlement delays at rival depository CDSL, NSDL has reportedly migrated to its disaster recovery (DR) site to resolve the issue. The exact reason for the problem at NSDL could not be ascertained. Email queries to NSDL remained unanswered till the time of publication.

India stock settlement process follows a T+1 cycle. Once the trades are completed on the stock exchange, the clearing company settles them the next day before 10:30 a.m. by collecting the securities and funds from brokers and disbursing payments in the afternoon, around 3:30 p.m. After that, the custodians credit the shares to the investors’ dematerialized accounts.

This week, the technical disruption at NSDL delayed this final step.

“Due to a glitch on the NSDL side, transfer of shares between depositories was affected, due to which brokers could not make payments to clearing companies,” said the COO of a retail brokerage who wished to remain anonymous.

“Clearing firms transferred some shares from CDSL to brokers’ CDSL Pool account, which ideally should have gone directly to clients’ Demat accounts. NSDL was unable to do BOD (Beginning Of Day) of its systems till the next business day till this afternoon, which delayed operations.” If the shares are not available at the start of the day, investors cannot use or sell them that day.

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