An off-market transfer is a process in which investors privately transfer their shares without using the services of a share broking firm. This process is settled between two parties on mutually agreed terms. The stock exchange or the clearing corporation is not involved.
Legacy transfers, gifts, the transaction of shares/scrips between two Demat accounts, and transactions in unlisted securities are some of the examples of off-market transfers. In this transaction, one party is transferor, and another one is transferee.
Under the instruction slip, the transferor will provide a DIS (delivery instruction slip) to his depository participant (DP) while doing the off-market transaction and instructing him to transfer the scrips to the transferee’s demat account but for that transferor must select the ‘off-market trade’ option in the delivery instruction slip.
Under the receipt instruction, the transferee/buyer must provide a receipt instruction to his depository participant, but this happens only when instructions for the automatic receipt of demat securities are not in place.
Under the depository participant, the seller must provide details of the receiver. In that information, it must include the name of depository participant, and transferor must mention the purpose of transfer along with depository participant ID.
While providing the security details, the delivery instruction slip must sign by the transferor, and the slip must mention the ISIN and quantum of securities to be transferred. If the joint holders hold DIS, then the signatures must be in the order of their names in the account.
Some of the common off-market transfer scenarios are:
- Transaction of shares between husband and wife.
- A transaction of shares made by parents to their children
- Transfer of deceased family member shares to a surviving family member.
Off-market transfer methods: - Under the mechanism of off-market transfer, services from brokerage firms are not required since the stock market does not entertain the off-market transfer of shares.
While conducting the off-market transaction, both the parties (transferor and transferee) need to complete and sign the relevant section of the “Off-market Transfer Form,” and after the completion, they need to submit the form to the applicable share registry.
After the submission, the applicable share registry will transfer the allocated quantity of shares from the transferor account and then add the allocated quantity of shares to the transferee account.
Both transferor and transferee will receive written notification from the share registry. In the notification, it is stated that the transfer has taken place and it is also mentioned that the scrips are now registered in the name of the transferee.
The cost involved in off-market transfer: Currently, an investor does not have to pay an administration fee while conducting an off-market transfer in New Zealand (NZX) shares.
If an investor holds ASX shares on an SRN (Security Reference Number) then he/she needs to meet the identification requirements of Australian share registry and after that he/she will be liable for the payment of the administration fee but if ASX shares are held under CHESS sponsorship with Share Investing Limited, through Direct Broking, then investor does not need to pay administration fee on off-market transfer.
An investor can obtain the off-market transfer form from the applicable share registry.
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