Re-pledge
A further pledge of securities already pledged to a Trading or Clearing Member, moving the same margin pledge down the TM-to-CM-to-CC chain without the shares ever leaving the original client's demat account.
In plain language
A client pledging shares as margin is only the first step. The Trading Member cannot simply keep that collateral to itself. It has to pass it further up the chain, without physically moving anything. That further pledge is called a re-pledge.
The chain runs in a fixed direction. The client pledges securities to the TM. The TM then re-pledges the very same securities to the Clearing Member. The CM can, in turn, re-pledge them onward to the Clearing Corporation. At every single step, the shares stay parked in the original client's own demat account. Only the pledge marking moves, one hop at a time.
How it works
From Chapter 9, section 9.4: under a SEBI circular dated 25 February 2020, effective 1 August 2020, a TM/CM may accept collateral from clients only by way of a margin pledge created in the depository system, under Section 12 of the Depositories Act, 1996 read with Regulation 79 of the SEBI (D&P) Regulations, 2018. Each of the TM and the CM must open a separate demat account tagged "Client Securities Margin Pledge Account", and a re-pledge may be made only out of that dedicated account.
A client margin-pledges securities to the TM; the TM re-pledges the same securities to the CM; the CM re-pledges them onward to the Clearing Corporation — three hops, always in that order. The complete trail of every re-pledge is reflected in the pledgor's own demat account, so the client can see exactly where the shares have travelled. Separately, a CM can also accept a margin pledge from its CDSL easiest login as pledgee, and re-pledge to the CC as pledgor from that same login.
A worked example
Ms Kulkarni pledges 4,000 shares worth Rs 24,00,000 (at Rs 600 each) as margin with her broker, a Trading Member, to trade in the futures segment.
| Hop | Who re-pledges | Where the 4,000 shares physically sit |
|---|---|---|
| 1. Client pledges to TM | — | Ms Kulkarni's own demat account |
| 2. TM re-pledges to CM | The TM | Still Ms Kulkarni's own demat account |
| 3. CM re-pledges to CC | The CM | Still Ms Kulkarni's own demat account |
At no point do the 4,000 shares move into anyone else's demat account. Ms Kulkarni's own statement of holding shows the entire trail — pledged to the TM, re-pledged to the CM, re-pledged to the CC — so she can verify exactly where her collateral has gone at each of the three hops.
Why NISM asks about it
Chapter 9, section 9.4, sets out the pledge/re-pledge chain that replaced the old practice of transferring margin securities outright. Expect the fixed order of the chain (client to TM, TM to CM, CM to CC) and the fact that the shares never leave the original pledgor's own demat account at any hop.
Common exam traps
- Re-pledge moves the pledge marking, not the shares themselves — the securities stay in the original client's demat account through every hop.
- Only a TM or CM can re-pledge, and only out of its dedicated "Client Securities Margin Pledge Account" — an ordinary pledgee cannot re-pledge at will.
- The circular is dated 25 February 2020; it took effect from 1 August 2020 — two different dates, easily swapped.
- Do not confuse re-pledge with a title transfer collateral arrangement — the older, now-banned practice this chain replaced.
Check yourself
1.A trading member wishes to re-pledge client securities received as margin. In whose favour may it do so?
- a)In favour of any demat account of the clearing member
- b)Only in favour of the CM's demat account tagged as "Client Securities Margin Pledge Account"
- c)Directly in favour of the Clearing Corporation
- d)In favour of its own proprietary demat account
Show the answer
Answer: (b) Only in favour of the CM's demat account tagged as "Client Securities Margin Pledge Account"
The TM can re-pledge only in favour of the CM's demat account tagged as "Client Securities Margin Pledge Account".
Option C skips a link in the chain. The permitted route is client → TM → CM → CC: a client can margin pledge securities with the TM, and TM can re-pledge the same with CM, and CM in turn can re-pledge the same to the Clearing Corporation. Only the CM deals with the CC, and even then the CM shall create a re-pledge of securities on the approved list only to the CC out of the "Client Securities Margin Pledge Account".
Option D is exactly what the 2020 framework was written to stop. Transfer of securities to the demat account of the TM/CM for margin purposes (i.e. title transfer collateral arrangements) shall be prohibited, effective August 01, 2020.
Two consents make the chain lawful: the pledge request form shall have a clause regarding express consent by the client for re-pledge of the securities by the TM to CM and further by the CM to CC, and OTP confirmation from the client is also required if securities of such client are being re-pledged. Throughout, the complete trail of such re-pledge shall be reflected in the demat account of the pledgor.
2.Which CDSL facility permits a beneficial owner to submit transaction instructions and to pledge securities?
- a)easi
- b)easiest
- c)SMART
- d)IDeAS
Show the answer
Answer: (b) easiest
easiest — Electronic Access to Securities Information and Execution of Secured Transaction — which permits BOs/CMs to submit debit/credit transaction instructions to effect off-market, on-market, inter-depository and early pay-in of transactions, freeze/unfreeze and pledge, unpledge and confiscation.
Option A is the viewing facility: easi — Electronic Access to Securities Information — whereby beneficial owner can view their demat account holding, download the transaction statements.
Option C is the SMS alert registration, and option D is NSDL's viewing facility, not CDSL's.
The extra capabilities of easiest:
Through the easiest facility, the BO can freeze their demat account at BO level, ISIN level as well as can initiate partial level freeze.
The BO can pledge the securities as a pledgor, and Pledgee BO can accept the pledge as a pledgee if both the BOs are registered for CDSL's easiest facility. Further, the pledgee can execute the confiscation if the pledgor fails to fulfill the obligation.
BO also has the facility to initiate the pledge for the purpose of Margin from their easiest login. CM has the facility to accept the Margin pledge from its easiest login as a pledgee and the CM has the facility to re-pledge the securities to the CC as a pledgor.
Registration differs by holding pattern: a sole holder beneficial owner is not required to submit any registration forms to DP for authentication nor the trusted account declaration in case of easiest trusted account user. In case of a beneficial owner holding a joint demat account, the beneficial owner is required to submit the duly signed registration form to the DP for authentication.
And nomination can be handled there: the sole holder BO can update the nomination details or opt out of nomination details in their demat account through CDSL's easi/easiest facility as well as from the website of CDSL.
Where this is taught
Free preparation for NISM Series VIRelated terms
- Margin pledgeThe only permitted way for a client to give securities as margin — a special pledge created in the depository system that leaves the shares in the client's own demat account instead of transferring them to the broker.
- 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.
- PledgeeThe lender in a pledge or hypothecation — the party who confirms the pledgor's request through its own DP, and who is recorded as beneficial owner of the securities only on invocation.
- PledgorThe borrower in a pledge or hypothecation — the beneficial owner who offers demat securities as collateral, initiates the transaction through its own DP, and keeps ownership and corporate benefits until default.
- Title transfer collateral arrangementThe now-prohibited practice of transferring a client's securities into a Trading or Clearing Member's own demat account for margin purposes, replaced from August 2020 by the margin pledge mechanism.