Account Holders may use the shares in their depository accounts as collateral against a loan without the need to rematerialise the securities (provided the pledgee agrees to take collateral in this form).
The pledgee must be a participant or an depository account holder.
The Pledgor gives instructions to his participant to pledge his shares to the pledgee. The Pledgee must confirm acceptance of the pledge.
The shares are then ‘frozen' in the account of the pledgor and cannot be moved until instructions are received from the pledgee.
The instruction from the pledgee may be to ‘release' the pledge (for example if the loan has been repaid) or to move the shares to his own (or a third party) account (for example, if the pledgor has defaulted on his repayments).