Execution date
The date on which a depository instruction is to take effect: a DIS debit waits till the end of that day for balance and then fails; for allotments and corporate actions, the day credits are made.
In plain language
Every depository instruction has a date on which it is actually meant to happen. That is its execution date.
It is not the date the client fills in the form, and not the date the DP keys it in. On a Delivery Instruction Slip, if the debit is to take effect on a particular future date, the account holder writes that date in the execution date space. The debit is then effected on that date.
The same idea runs through the rest of the system. When an issuer or its R&T Agent sends allotment or corporate action details, it tells the depository the date on which credits should be made. The workbook calls that the execution date too. Pledges can be set up with a future execution date. Even OTP confirmation of off-market transfers is tied to the end of day of the execution date.
The practical rule is simple. On the execution date the system checks whether it can act. If it cannot by end of day, the instruction fails.
How it works
Debit instructions and OTP (Chapter 8).
| Situation on the execution date | What happens |
|---|---|
| Adequate balance | Quantity debited on the execution date |
| Balance short | Instruction waits for balance till end of the execution day |
| Balance arrives during the day — NSDL | Debited immediately on receipt |
| Balance arrives during the day — CDSL | Debited after predefined intervals |
| No adequate balance by end of day | Instruction fails, in both NSDL and CDSL |
OTP for off-market transfers. SEBI's OTP consent requirement applies from execution date November 1, 2020. In NSDL a link goes to the client on the execution date. Transactions still "Pending for OTP Confirmation" at end of day of the execution date are rejected. OTP is waived for the reason code "Implementation of Government / Regulatory Direction / Orders".
Tender offers (Chapter 10). A DIS for a buyback, takeover or delisting tender must carry the execution date, tender offer type, event number, CM BP ID, ISIN and quantity.
SPEED-e holiday master (Chapter 5). Once a DP marks a holiday, its clients cannot submit instructions with that holiday as the execution date.
Minor turned major (Chapter 4). A guardian's instruction with an execution date on or after the date the minor turns major is executed only after the now-major client confirms it.
Pledge (Chapter 9). A pledgor can set up a pledge with a future execution date, even with insufficient or nil balance. If the Pledge Request Form gives no execution date, the business date on which the pledgor's DP verifies the pledge is taken.
Credits from issuers (Chapter 10). For public issues, the issuer or R&T Agent sends allottee details with the execution date, and the depository credits accounts on that date. Securities arising from bonus, split, consolidation or merger go to a pledgor with pledge marked, provided a pledge exists for at least one share on the execution date of the corporate action.
Debt instruments (Chapter 11). A credit a day earlier earns a day's interest, so the execution date is crucial.
A worked example
Illustrative client and figures.
Farhan submits an off-market DIS on Monday 7 September to transfer 500 shares (at Rs 820, worth Rs 4,10,000) to his brother, with execution date Thursday 10 September.
| When | Account balance | Result |
|---|---|---|
| Thursday morning | 300 shares | Short by 200; the instruction waits |
| Thursday 2 pm | 500 shares (200 arrive from an earlier purchase) | NSDL: debited immediately. CDSL: debited at the next predefined interval |
| Alternative: the 200 never arrive by end of Thursday | 300 shares | Instruction fails in both depositories. Farhan needs a fresh DIS |
OTP. Farhan's account is with an NSDL DP. On Thursday he gets a link and must confirm by OTP. If he forgets and the transfer is still "Pending for OTP Confirmation" at end of day Thursday, it is rejected, even with 500 shares in the account.
Pledge with a future date. Farhan also sets up a pledge of 1,000 shares with execution date 15 September, though today he holds only 800. The request is allowed to be set up. If he had left the date blank, the date his DP verified the pledge would have been taken instead.
Corporate action. A 1:1 bonus has execution date 20 September. On that date 1 share of his is still pledged. The bonus shares are credited to him with pledge marked.
Why NISM asks about it
Chapter 8 (Functions of DP - Trading and Settlement, 13% weightage, the heaviest chapter) covers execution dates on DIS, the end-of-day failure rule, the NSDL vs CDSL timing difference and OTP rejection. Chapter 9 (10%) covers future-dated pledges, and its review question asks whether a pledge can be created with a future execution date (yes). Chapter 10 (7%) covers execution dates for allotments and corporate actions, Chapter 11 (10%) the debt-instrument point, and Chapters 4 and 5 the minor-turned-major and SPEED-e holiday rules.
Common exam traps
- An instruction waits only till the end of the execution day. It does not carry forward to the next day; it fails.
- NSDL debits immediately; CDSL at predefined intervals when balance arrives during the day. The failure rule is the same for both.
- Unconfirmed OTP means rejection at end of day of the execution date, even if the balance is there.
- A pledge can be future-dated and set up even with insufficient or nil balance.
- Blank date on a pledge form means the business date on which the pledgor's DP verifies it.
- The issuer or R&T Agent chooses the execution date for allotment and corporate action credits, not the DP.
- One pledged share is enough. Corporate action securities are credited with pledge marked if a pledge exists for at least one share on the execution date.
- Guardian instructions dated on or after majority need the new major's confirmation.
Check yourself
1.An NSDL client's off-market instruction for 300 shares runs on the execution date with only 100 shares in the account. At 2 p.m. the same day, 200 shares are credited. What happens?
- a)The instruction has already failed and cannot be revived
- b)The account is debited immediately on receipt of the adequate balance
- c)The account is debited only after pre-defined intervals of time
- d)The instruction carries forward to the next business day
Show the answer
Answer: (b) The account is debited immediately on receipt of the adequate balance
The instruction waits for adequate balances till the end of the execution day, so it has not failed at 2 p.m.
In NSDL, the account will be debited immediately on receipt of adequate balances in the account. Option C describes CDSL, where the account is debited after pre-defined intervals of time — the transfer still happens the same day, just at the next processing cycle.
Option D is the standard trap. In cases where adequate balances are not received till the end of the day of the execution date, the instruction will fail, both for NSDL and CDSL. There is no carry-forward.
2.Under SEBI's streamlined process for public issues of equity shares and convertibles, what is the payment mechanism in public issues?
- a)Cheque or demand draft in favour of the issuer's escrow account
- b)Any mode chosen by the investor, including cash at the DP counter
- c)Application Supported by Blocked Amount (ASBA), as the sole payment mechanism
- d)Direct debit of the investor's demat-linked bank account by the depository
Show the answer
Answer: (c) Application Supported by Blocked Amount (ASBA), as the sole payment mechanism
The workbook: "Application Supported by Blocked Amount (ASBA) mechanism is the sole payment mechanism in public issues." With it, SEBI has also reduced the time from issue closure to listing in an equity IPO to 3 working days.
- A and B describe payment modes that ASBA has replaced. The word "sole" rules them out.
- D gives the depository a payment role. The depository only credits securities to allottee accounts on the execution date given by the issuer / RTA. The movement of funds is not the depository's job.
3.When a corporate action occurs on pledged securities, the corporate benefits:
- a)Accrue to the pledgee, who holds the security
- b)Accrue to the pledgor, with securities benefits credited to his account with the pledge marked in favour of the pledgee
- c)Are held by the depository until the pledge is closed
- d)Are divided equally between pledgor and pledgee
Show the answer
Answer: (b) Accrue to the pledgor, with securities benefits credited to his account with the pledge marked in favour of the pledgee
Ownership of the pledged/hypothecated securities remains with the pledgor (borrower) until the pledge is invoked. Hence, all corporate benefits — cash and non-cash — like dividends, bonus, rights etc., will accrue to the borrower. Dividends will be given to the borrower in the usual manner.
And on the securities side: the securities arising out of corporate actions like bonus, share splits or consolidation or exchange under a merger/acquisition scheme are credited to the account of the pledgor, with pledge marked in favour of the pledgee, provided that on the execution date of the corporate action, pledge exists for atleast one share.
Two distinct rules, and both matter. Cash benefits reach the borrower unencumbered — the lender has no claim on a dividend. Securities benefits reach the borrower already carrying the pledge.
The reason for the second rule is the lender's protection. A 1:1 bonus roughly halves the value of each existing share; if the new shares arrived free of the pledge, the lender's security would be diluted by half through no act of its own.
And the qualifying condition is minimal: pledge exists for atleast one share on the execution date of the corporate action.
Option A confuses possession of security with ownership. A pledgee's rights crystallise only on invocation.
A parallel principle appears elsewhere in the chapter: securities balances lying in the accounts of the Clearing Members/Clearing Corporations/Intermediaries will be eligible to receive corporate benefits, distributed for onward distribution to the beneficial owners, and held in trust on behalf of the beneficial owners.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Delivery Instruction SlipThe signed form on which a beneficial owner instructs the DP to debit the demat account — no beneficiary account can be debited without one, whether the transfer is on-market or off-market.
- Debt securityA written agreement to repay a loan, usually with interest, within a set time. Bonds, debentures, CP, CDs, G-Secs and T-Bills are all debt securities, and any type can be admitted to the depository.
- Minor becoming majorThe change of status in a folio held in a minor's name when the minor turns 18 — the new major completes PAN, KYC and bank updates, and no transactions are allowed until the AMC's records show the change.
- PledgeA charge created over demat securities in favour of a lender who may appropriate them unilaterally on default — created by book entry under section 12 of the Depositories Act, not by handing over anything.
- Non-cash corporate actionA corporate action that distributes securities or changes holdings rather than paying money - bonus, rights, conversion, split, merger - which the depository executes by crediting and debiting demat accounts.
- Off-market transactionA transfer of securities between two demat accounts on terms agreed between the parties, settled directly through the depository without a clearing member or clearing corporation.
- Closure dateThe date entered on a Pledge Request Form indicating the intended duration of a pledge or hypothecation, after which the pledgee's DP must confirm creation of the pledge, except in NSDL where this rule does not apply.
- Instruction IDThe unique number the DP system generates for each off-market delivery instruction it enters, which the DP writes on the instruction slip for future reference.