What does "Never keep funds/securities idle with broker" mean in the context of Zerodha

General
1

Received a message from NSE saying “INVESTOR ALERT: Never keep funds/securities idle with broker & insist on monthly/quarterly settlement”

What do these terms mean in the context of Zerodha being the broker?
Since I’m an investor and not a trader, I will be holding shares \ mutual funds for the long term. Is NSE Saying we should not invest for the long term? That makes no sense

2

Hi Akash,

I think the following link should help
https://tradingqna.com/t/what-is-quarterly-settlement-why-do-brokers-do-this-for-active-traders/176

Thanks,
Lindo

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3

No this is not what NSE is saying. Some traditional brokers hold client shares in the broker pool account and if this a long-term investment, then chances are the client will not be looking to sell out the shares anytime soon. This could give the broker an opportunity to lend these shares and receive margin in return, wherein trades can be placed with the margin, in turn, generating brokerage for the broker himself. This is the situation they’re trying to avoid. At Zerodha, all shares are held in the clients’ respective Demat accounts. So settlement of securities is not required. Only in case you pledge shares and don’t use the collateral margin, or if we start a margin lending facility against shares, you lend shares for margin and you don’t use that margin too, then the pledged shares will be credited back to your Demat once a quarter from Zerodha’s pool account.

So yeah, long-term investments are definitely the way to go forward!

Also, read this zconnect post on quarterly settlement of funds.

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4

Thanks! I wasnt aware of the broker pool concept

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5

Angel broker keeps customers shares in pool account.