When can pledged stocks be invoked and what happens afterwards?

When can pledged stocks be invoked and what happens afterwards?

Pledged stocks can be automatically unpledged or invoked in specific situations defined by clearing corporations and FYERS’ risk management policies. These measures are designed to ensure compliance with regulatory limits and to safeguard traders from excess losses.

Where do pledged stocks go?

When you pledge your stocks, they are not transferred to FYERS but are instead sent to the exchange. The exchange then releases the margin corresponding to these stocks, and FYERS credits this pledge margin to your trading account. This ensures your stocks remain safe and under the custody of a regulated exchange.

For a step-by-step guide on how to pledge your stocks, please refer to this article.

1. Clearing Corporation Limits

Clearing members have pre-set limits defined by the Clearing Corporation regarding how many shares of a specific company they can accept as a pledge.

  • If this limit is exceeded, the extra pledged shares are automatically unpledged and returned to your Demat account.
  • Example: If the maximum limit is 10,00,000 shares of RIL, and you pledge 11,00,000 shares, only 10 lakh will be accepted. The remaining 1 lakh shares will be unpledged and credited back to your account on the following trading day.
  • Clients are always informed by email whenever such unpledging occurs.

2. Risk Management Invocation

If you use pledged margins for trading and your account shows a debit balance (negative funds), you must clear it by transferring additional cash.

  • If you fail to add funds, FYERS’ Risk Management System (RMS) may invoke the pledge, i.e., sell your pledged holdings to recover the shortfall.
  • This action is not taken immediately — you are first informed via phone call and email.
  • If you have open positions, the RMS will first attempt to square them off before invoking the pledge.

Key Points to Remember

  • Pledged stocks are held safely at the exchange, not with FYERS.
  • Automatic unpledging happens if clearing corporation share limits are crossed.
  • Invocation occurs if you fail to clear debit balances arising from pledged margin usage.
  • You will always receive prior notification before pledged shares are invoked or sold.

Last updated: 12 Sep 2025

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