Off-Market Trades: Understanding Transfers Outside the Clearinghouse

Summary: Off-Market Trades/Transfers: Explore how these trades are processed outside of traditional clearing corporations.

10 Jan 2023 by Team FinFIRST

Trades or Transfers which are not routed or settled through the Clearing Corporation/ Clearing House (CC/CH) of an exchange are classified as "Off-Market Trades / Transfers".

An Off-Market Trade / Transfer is a way of transferring shares directly between two demat accounts without the involvement of CC/CH of an exchange. It is similar to the transfer of money from one bank account to another via IMPS, NEFT, etc., which happens by debiting one bank account and crediting another. An Off-Market Trade / Transfer can be executed between demat accounts within the same Depository, i.e., NSDL or CDSL, or between Depositories, i.e., NSDL and CDSL. If you wish to transfer some or all shares held in your demat account to the demat account of someone else, it is called an Off-Market Transfer. The gift of shares to your family members is an example of an Off-Market-Transfer.

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Steps for Off-Market Trades or Transfers of shares:

Submit a physical Delivery Instruction Slip (DIS) to your Depository Participant (DP), where you maintain your Demat Account. If the DP of the client (sender) is registered for the SPEED-e facility of NSDL or Easi/Easiest facility of CDSL, and the client (sender) has also subscribed for the same, the Off-Market Trade or Transfer instruction can also be submitted electronically
Before submission, make sure that all mandatory fields are filled in the DIS
On the execution date of the Off-Market Trade or Transfer instruction, a link is generated and sent by the Depository, i.e., NSDL or CDSL, on the mobile number and email ID registered in the demat account of the client (sender)
On clicking the link, the client is redirected to a web page of the Depository, i.e., NSDL or CDSL, where after authentication, the client sees details of Off-Market Trade or Transfer instructions which are pending confirmation
If the details are correct, the client may proceed with the instruction by generating OTP. OTP is sent to the client's mobile number, which is registered in the demat account
On OTP confirmation, Off-Market Trade or Transfer instruction(s) are processed

For a transfer of securities to be effected from one demat account to another demat account, details mentioned in the "delivery" and "receipt" instructions need to match. Investors need to be especially careful with respect to the "execution date" mentioned in these two forms. The transfer will be rejected if there is a mismatch, even if all other details in these two forms match. In case the target demat account has already enabled the standing instruction in the demat account, there is no requirement to provide the receipt instruction to its DP.

Clients must ensure that the correct mobile number and email ID are registered in their demat account. Clients must contact their DP immediately in case there is any change in the same. Further, Stamp Duty, if applicable, needs to be paid to the Depositories, i.e., NSDL or CDSL, for successful execution of the Off-Market Trade / Transfer instruction. The Stamp Duty can either be paid by the client (sender) or the DP, where the client (sender) is maintaining the demat account. The payment aspect is handled outside the Depositories, i.e., NSDL or CDSL environment between the selling and buying clients.

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