The bar for financial software keeps rising, and not by choice. Since the start of 2025, the EU’s DORA rules have required financial firms to demonstrate operational resilience, and PCI DSS 4.0 has made stronger authentication and continuous monitoring mandatory for anyone handling card data.

Work that used to be optional, the security and the compliance, is now table stakes, enforced by regulators.

For a product team, that changes the stakes of choosing a development partner. A firm that treats compliance as an afterthought can leave you failing an audit you cannot reschedule, or rebuilding a system that shipped to the wrong standard. The partners that hold up are the ones that meet these requirements by default, with certifications and case studies to prove it.

This guide profiles the top fintech software development companies for 2026, each with a fact box, a place in the comparison table, and a clear strength, with verified certifications throughout. Use it to match a partner to the financial product you are building and to the standards it must meet.

Build In-House or Hire a Development Partner?

One of the first decisions is whether to build with an in-house team or hire an external partner, and each has real trade-offs.

An in-house team gives you the most control and keeps knowledge inside the company, but hiring senior fintech engineers is slow and expensive, and a full team can sit idle once the heavy build is done.

A development partner brings people who have shipped financial products before, can start in weeks rather than months, and scales up or down as the work changes, though it asks for clear communication and good documentation to avoid knowledge gaps.

Many companies blend the two: a small in-house core that owns product and architecture, with an external partner supplying delivery capacity.

What matters most either way is proven fintech experience, since the domain is unforgiving of on-the-job learning.

How These Firms Made the Cut

We built this list of top fintech software development companies on evidence, not reputation. Every firm had to clear four checks:

Top Fintech Software Development Companies, Reviewed for 2026

Nine firms made the list, each with a fact box and a short profile. The comparison table covers the essentials; the write-ups explain what each one does best.

1. Relevant Software: built to the standards fintech now requires

Relevant Software is one of the top fintech software development companies and the kind of partner the new compliance baseline rewards. Founded in 2013, it holds ISO 27001, HIPAA, and GDPR certifications and treats security and regulatory controls as architecture rather than paperwork, with 92% of its engineers being senior and 96% retention keeping that knowledge in-house. Its work spans digital and core banking, payments, lending, white-label products, and AI-based fraud and compliance tooling.

The results are documented: one lending client reported net profit up 25% year over year and a peak of roughly 7,000 loans handled smoothly after a platform rebuild, per its Clutch review, part of a record of 246 projects at a 9.8 Net Promoter Score.

2. Itexus: a fintech-only engineering partner

When a build spans multiple financial domains, a generalist starts improvising. Itexus does not: the Delaware-incorporated firm, with engineering across Eastern Europe, works only in fintech and has the range to match, digital banking, payments, trading, and wealth platforms, crypto wallets, and RegTech, for clients in more than twenty countries. More than 70% of its 160-plus engineers are senior, which keeps its multi-domain architecture coherent. It is SOC 2, PCI DSS, and ISO 27001 compliant.

3. Inoxoft: mobile banking and lending for startups

Startups that need a banking or lending app built to pass a compliance review are Inoxoft’s core audience. Headquartered in Philadelphia with delivery centers in Lviv, Tallinn, and Tel Aviv, the firm keeps mobile banking, lending platforms, and AI-driven financial analytics at the center of its fintech work, often as compliance-ready MVPs for US and European clients. Its engineers cover Flutter and React Native on mobile and .NET, Python, and Node.js on the backend, so cross-platform delivery stays under one roof. The team passed 230 people while holding a 5.0 Clutch rating across 70-plus reviews, and it is ISO 27001 certified and a Microsoft and Google Cloud partner.

4. Django Stars: Python backends for data-heavy fintech

Mortgage and lending platforms live or die on their data handling, which is where Django Stars fits. True to its name, the firm works in Python and Django, a stack suited to data-heavy financial backends, and it has put that to work on the MVP for the digital mortgage broker Molo Finance and on the MoneyPark platform, mostly for US, UK, and Swiss clients. Around 100 people, US-incorporated, with engineers in Kyiv; reports a 92.7% Net Promoter Score and carries ISO 9001, ISO 14001, and ISO 27001.

5. Cleveroad: full-cycle digital banking with a US presence

A US business address with Eastern European engineering rates is a combination that founders often ask for, and Cleveroad offers it: registered in Delaware, with its main R&D hub in Tallinn and more than 280 in-house engineers. It ranked eleventh in the world on the 2025 Clutch 1000. Its fintech work is deliberately broad, digital and neobanking platforms, lending, payments, insurance tools, trading software, and blockchain wallets, with AI for fraud detection, and its standout project rebuilt the online banking ecosystem for the European Investment Bank under Swiss FINMA and FMIA rules. It holds ISO 9001 and ISO 27001 certifications and complies with PCI DSS, SOC 2, and GDPR.

6. S-PRO: Swiss banking, fintech, and blockchain

There are not many development firms a Swiss bank would shortlist, and S-PRO is one. Headquartered in Zurich with Ukrainian roots, it earns about two-thirds of its revenue in finance and specializes in Swiss banking and blockchain, with a white-label mobile banking constructor for the BaaS provider Treezor, a Swiss FinTech award for a client platform, and a crypto bank based in Zug among the results. Its location brings genuine experience with FINMA-regulated firms, and a team of around 250 backed by ISO 27001 and ISO 27701 for security and privacy.

7. 10Clouds: blockchain, AI, and design

Recognition from both Deloitte and the Financial Times is rare for a studio of around 200, but 10Clouds has it. The Warsaw firm pairs blockchain and Web3 engineering with award-winning product design and a growing AI practice, a mix visible in its financial portfolio: TrustStamp’s identity verification, work on the Aleph Zero blockchain, and DCLEX, a stock-trading platform built on-chain with NFT identity. It is ISO 27001 certified with more than 70 Clutch reviews. For a crypto or tokenized product that also has to feel right, it covers both ends.

8. DashDevs: white-label neobank infrastructure

For teams wary of vendor lock-in, DashDevs has an unusual pitch: it hands over the full source code. Its FintechCore platform is a white-label neobank core, with 60+ modules and 470+ API endpoints spanning KYC, card issuing, ledgers, and AML, that clients own outright. The London firm, with Eastern European delivery and roughly 15 years in financial software, used that foundation to launch the UK challenger bank Dozens in 9 months and counts Chip and RakBank among its clients. It is ISO 27001 certified and an AWS partner.

9. Netguru: design-led fintech and banking-as-a-service

When a Swiss private bank or a fast-growing African fintech needs a product that feels effortless, design stops being decoration, and Netguru built its reputation there. The Poznan firm, with more than 800 people and the largest on this list, leads with UX research and product strategy. Its fintech experience runs through digital banking, regtech, wealthtech, banking-as-a-service, and open banking, with backend and API work for the BaaS platform Solarisbank, a multi-country KYC and AML system for FairMoney, and products for the wealth manager Pictet. It works to GDPR, PCI DSS, and ISO 27001.

How Much Does It Cost to Build a Fintech Product?

Cost in fintech is driven more by complexity and compliance than by the number of features. Industry estimates for 2026 put a focused MVP at roughly $50,000 to $150,000, while a full, production-grade platform runs from about $200,000 to $500,000 and up.

Regulated products start higher because mandatory work like KYC, AML, and PCI DSS adds engineering time from the first sprint, and a fintech build typically takes 40 to 60 percent longer than a comparable app in another industry.

Where the team sits matters too: senior engineers in Central and Eastern Europe often bill around $50 an hour, compared with $150 to $250 in San Francisco or London. And the build is not the end of spending, since most teams budget another 15 to 20 percent of the cost each year for maintenance, security, and compliance.

How Long Does a Fintech Build Take?

Timelines depend on the scope and how much of the product has to be built rather than integrated. A focused MVP that leans on third-party services for payments and identity usually ships in three to five months. A growth-stage platform with more features and tighter controls takes six to nine months, and a regulated, enterprise-grade system can run nine to eighteen months or longer. Two things stretch schedules in ways teams underestimate. Security and compliance work adds testing and architecture time, which is why financial products take noticeably longer than consumer apps of similar size. And if the product needs a sponsor bank or a banking-as-a-service partner, those approvals alone can take three to six months and should run in parallel with development, not after it.

Conclusions

With compliance now mandatory rather than optional, the safest choice among the top fintech software development companies is the one that already builds to the standards your product must meet. So verify before you sign: ask which certifications a firm actually holds and for which entities, and ask to see a product shipped in your specific area. Then match the specialization to your need, whether that is a neobank core, a payments rail, a lending engine, or a polished consumer app. The firms here all clear the evidence bar; the right one is the specialist whose track record lines up with what you are building.

Copyright ©2026 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

NEW YORK — The Dow Jones Industrial Average climbed to a record closing high Thursday, surging nearly 595 points and firmly establishing itself as the market’s standout performer heading into the Fourth of July holiday weekend, even as the Nasdaq Composite slid for a second consecutive session and the semiconductor sector endured another wave of sharp selling that reopened questions about how much of the AI trade’s extraordinary first-half gains can be sustained.

The blue-chip index added 594.83 points, or 1.14%, to close at a record 52,900.07, also touching a new all-time intraday high of 52,903.85 during the session. The S&P 500 rose less than one point to finish essentially flat at 7,483.24, while the Nasdaq Composite dropped 0.8% to settle at 25,832.67. U.S. markets will be closed Friday in observance of Independence Day, which falls on Saturday this year, ending a holiday-shortened trading week that produced one of the more divergent performances between the Dow and the technology-heavy indexes in recent memory.

The Dow Jones Industrial Average scaled to record highs on Thursday as investors reacted to a weaker-than-expected nonfarm payrolls report for June.

The June employment report, released Thursday morning, delivered a notable miss against expectations. The U.S. economy added 57,000 jobs in June, well below the Dow Jones consensus estimate of 115,000. The unemployment rate, however, edged down to 4.2% from 4.3%, a reading that reflects a falling labor force participation rate rather than a surge in employment, and one that investors interpreted through the lens of Federal Reserve policy rather than labor market health.

Chris Zaccarelli, chief investment officer at Northlight Asset Management, framed the market’s reaction to the soft jobs number in terms of what it means for the Federal Reserve’s next move.

“This morning’s report is a stark reversal from recent reports because there were a lot fewer jobs created than expected, and prior months’ numbers were revised lower,” Zaccarelli said. “While the headline may be negative, slowing job growth, there could be a silver lining for markets, as it could force some of the more hawkish Fed officials to reconsider additional rate hikes to fight inflation.”

He added that the shift in emphasis could benefit equities broadly: “The employment mandate being brought back into focus could increase the odds of rates remaining on hold, which, all things being equal, would be better for markets than further tightening.”

The Dow’s strength was broad-based but concentrated in its more traditional, defensive and consumer-facing members rather than its technology components. 24 of the 30-strong holdings in the index rose today, enough to offset poor performances from Caterpillar (-3.20%) and UnitedHealth (-0.64%), which hold more influence in the price-weighted index. Apple (+4.46%) leads the index today, joined by McDonald’s (+3.34%) and others.

Apple’s gain was by far the most significant contribution to the index’s record close. Shares of the iPhone maker climbed nearly 5%, adding the equivalent of roughly 40 Dow points on its own, after Bloomberg reported the company had instructed component suppliers to prepare for a large-scale rollout of its first foldable iPhone this fall. The expected production target for the new form factor was reported at approximately 10 million units, up from earlier estimates of 7 to 8 million, a volume increase that investors read as a signal of strong consumer demand expectations for a product category Apple has not previously addressed.

The divergence between the Dow’s record performance and the Nasdaq’s decline illustrated in concentrated form the rotation trade that has defined much of the market’s narrative since the second quarter began. “The ‘Great Rotation’ trade persists into the third quarter as the blue boring names of the Dow Jones Industrials continue to attract inflows directly from recent profit taking money from tech stocks,” Jeff Kilburg, founder and CEO of KKM Financial, told CNBC. “This is extremely healthy and underscores the broadening breadth of equities for this continued bull market in its fourth year.”

The semiconductor sector bore the heaviest losses for the second consecutive session. Semiconductors fell for a second day in a row, weighing on the latter two benchmarks. The VanEck Semiconductor ETF dropped 4.5%, led by a 13.6% decline in Teradyne and a 11.5% slide for KLA. Nvidia shares also pulled back 1.4%, while Micron shares lost 5.5%. The two-day pullback in chip stocks follows an 82% first-half gain across the sector broadly, making some degree of consolidation expected even if the speed of Thursday’s decline surprised some observers.

CNBC also noted that Tesla fell despite strong delivery numbers, and Netflix jumped 5% in afternoon trading as a notable outlier within the otherwise struggling Nasdaq-100.

Alphabet fell roughly 1% after a European court upheld the 4.1 billion euro antitrust fine stemming from a 2018 European Commission ruling that Google had given its own applications unfair advantages in Android products, removing any lingering hope the company retained of overturning the penalty after years of legal challenges.

One notable new corporate development added another element to the session’s AI narrative. Reports indicated that OpenAI had opened discussions about selling a 5% stake to the U.S. government, a development that circulated through technology trading desks during the session without producing a decisive directional move for AI-adjacent stocks but adding to the sense of an AI trade in active reassessment rather than straightforward continued accumulation.

Ed Yardeni, the president of market advisory firm Yardeni Research and former chief investment strategist, said he expects the stock market to continue its rise over the second half of this year, forecasting a further 9% gain in the S&P 500.

With markets now closed until Monday, investors have the long weekend to assess the accumulated signals of an abbreviated first week of July: a Dow at a fresh all-time record, a Nasdaq in a two-day decline, a jobs market that may be softening faster than many expected just a month ago, and an Apple foldable iPhone narrative that has given one corner of the technology sector a reason to rally even as semiconductors cool.

SL Science Holding Limited shares soared more than 34% to close at $5.99 Thursday following its recent listing on the Nasdaq Global Market through a business combination with a special purpose acquisition company, highlighting strong investor appetite for innovative cell therapy platforms in the competitive biotechnology sector.

The Taiwan-headquartered company, formerly known as SL BIO Ltd., completed its merger with Horizon Space Acquisition II Corp. and began trading under the ticker SLBT on June 15. The transaction valued the combined entity at approximately $5.6 billion, providing substantial capital to advance its pipeline of gamma delta T cell therapies targeting solid tumors.

SL Science focuses on developing off-the-shelf cellular and gene therapies, with particular emphasis on gamma delta T cells for treating challenging cancers such as pancreatic and brain tumors. The approach aims to overcome limitations of traditional autologous cell therapies, including scalability, cost and manufacturing consistency.

The company’s platform also includes research into armed T-cells and exosome-based products derived from plant and milk sources for regenerative medicine applications. These diversified efforts position SL Science at the intersection of immuno-oncology and regenerative therapies.

SPAC Merger and Nasdaq Transition

The business combination with Horizon Space Acquisition II provided SL Science with access to public markets and additional funding through a PIPE investment. The listing marks a significant milestone for the preclinical-stage biotechnology firm seeking to accelerate clinical development.

Proceeds from the transaction will support research and development activities, manufacturing scale-up and potential strategic acquisitions. Management has outlined plans to advance lead candidates toward investigational new drug applications and early-stage clinical trials.

Biotechnology companies often pursue public listings via SPACs to expedite capital raising amid volatile traditional IPO markets. SL Science’s debut reflects continued investor interest in innovative cell and gene therapy platforms despite sector-wide challenges.

Pipeline and Scientific Approach

SL Science’s gamma delta T cell technology leverages a unique subset of immune cells with potential advantages in targeting solid tumors. Unlike conventional CAR-T therapies that have shown limited efficacy against solid cancers, gamma delta approaches may offer better tumor infiltration and reduced toxicity.

The company is also exploring exosome therapies using milk-derived and plant-based sources for applications in skin care, wound healing and broader regenerative medicine. These products complement the oncology focus while generating potential near-term revenue through cosmetic and wellness channels.

Preclinical data has demonstrated promising results in various models, though clinical validation remains essential for regulatory approval and commercial success. The firm aims to establish standardized manufacturing processes to enable scalable production.

Market Context and Challenges

The cell therapy sector has experienced rapid growth but faces hurdles including high development costs, manufacturing complexities and reimbursement uncertainties. SL Science’s off-the-shelf approach seeks to address some of these challenges compared to personalized therapies.

Competition in immuno-oncology is intense, with major pharmaceutical companies and specialized biotech firms pursuing similar targets. Differentiation through proprietary technologies and combination approaches will be critical for market positioning.

Regulatory pathways for cell and gene therapies have become more defined in major markets, though requirements for safety and efficacy data remain stringent. SL Science will need to navigate clinical trial requirements and manufacturing standards carefully.

Investor enthusiasm for biotechnology stocks fluctuates with broader market sentiment and clinical data readouts. SL Science’s post-listing volatility reflects typical patterns for newly public development-stage companies.

Financial Position and Strategy

As a preclinical company, SL Science currently generates limited revenue primarily from research services and early cosmetic products. The SPAC merger and associated financing provide runway for advancing its pipeline through key milestones.

Management has emphasized disciplined capital allocation focused on high-potential programs while exploring partnerships to accelerate development. Strategic acquisitions or licensing deals could expand the technology platform.

The company’s leadership team includes executives with experience in biotechnology and public company operations. Recent appointments have strengthened capabilities in clinical development and regulatory affairs.

Long-term success will depend on clinical trial outcomes, regulatory approvals and commercialization strategies. The biotechnology sector rewards companies that deliver transformative therapies while managing development risks effectively.

SL Science’s Nasdaq listing provides visibility and access to capital markets that can support ambitious research programs. As the company progresses its pipeline, upcoming clinical data and regulatory interactions will be closely watched by investors and industry observers.

The debut performance underscores market appetite for novel cell therapy platforms amid growing interest in immuno-oncology and regenerative medicine. SL Science joins a cohort of companies aiming to address significant unmet medical needs through innovative approaches.

Most online businesses set up their payment processing the same way: pick a well-known provider, integrate it, and move on. For a while, that works. But as a business grows, that single-provider setup starts to show its limits in ways that are easy to miss until they become expensive.

Failed transactions, provider outages, weak approval rates in specific markets, no fallback when something breaks, reporting spread across systems that don’t talk to each other. These are not edge cases. They are predictable consequences of scaling a business on payment infrastructure that was not designed to handle complexity.

The businesses solving this problem early are the ones moving to payment orchestration.

What Payment Orchestration Actually Means in Practice

Payment orchestration is a layer that sits above your payment providers and manages how transactions flow between them. Instead of being locked into one gateway, you connect multiple providers through a single integration and define rules for how your payments move.

That might mean routing UK card transactions to one acquirer, European payments to another, and automatically retrying a failed transaction through a backup provider before the customer ever sees a decline. It might mean applying different fraud rules by region, or having clean consolidated reporting across every provider in one place rather than logging into five dashboards separately.

The practical result is more control over what happens to each transaction, less dependency on any single provider, and a payment setup that can grow without requiring a new integration every time something changes.

Where the Revenue Leakage Hides

One of the less obvious costs of basic payment infrastructure is authorisation rate loss. Most businesses track revenue, but not the gap between attempted transactions and successful ones. That gap is often larger than expected.

A checkout that converts well but sends every transaction to a single provider will still lose a meaningful percentage to declines that have nothing to do with the customer’s ability to pay. Wrong routing for the card type, the currency, or the region accounts for a lot of those failures. So does having no retry logic when a provider returns a soft decline.

For a business doing a few hundred transactions a month, the numbers are small. For a business processing at scale, closing even a two or three percentage point gap in authorisation rates translates into real revenue recovered without changing anything about the product or the marketing.

The Multi-Provider Argument Is Not Just About Redundancy

Businesses often add a second payment provider primarily for resilience. If one goes down, the other keeps transactions running. That is a valid reason, but it undersells what a multi-provider setup actually makes possible.

Different providers perform differently across card types, currencies, and geographies. An acquirer with strong performance for UK Visa cards may not be the best option for cross-border transactions or for certain local payment methods. When you have only one provider, you have no choice but to accept their performance across every scenario. When you have several, and the routing logic to direct transactions appropriately, you can optimise for approval rates rather than just accepting the average.

For businesses expanding into new markets, this becomes increasingly important. Payment behaviour varies by country in ways that are not always obvious until the decline data starts coming in. Having the infrastructure to respond to that data, by adjusting routing rules without a new integration project, is a real operational advantage.

Why Startups and Scale-Ups Are Paying Attention

Payment orchestration used to be something only large enterprises could access, either by building it internally or by negotiating custom arrangements with major processors. That has changed. Modern platforms have made orchestration accessible to businesses at much earlier stages of growth.

For a startup that is expanding from one market to several, or a scale-up that has outgrown its first payment setup, a payment orchestrator can replace a significant amount of bespoke engineering work. Rather than building routing logic, retry mechanisms, provider failover, and consolidated reporting from scratch, the infrastructure is already there. The business configures it for their needs and connects the providers they want to work with.

The time-to-value argument is particularly relevant for teams without large payment engineering resources. Getting a more resilient, better-performing payment setup does not have to mean a six-month build project.

What to Look for When Evaluating Options

Not all orchestration platforms are built the same way, and a few things are worth thinking through before committing to one.

Connector coverage for your actual markets. The list of supported providers matters less than whether the specific providers and payment methods you need are properly supported. That includes the full flow: authorisations, refunds, recurring payments, 3DS, chargebacks. A technically available connector that only handles basic authorisations will leave gaps.

Routing flexibility. The ability to define routing rules yourself, understand why a transaction was routed a certain way, and adjust rules without raising an engineering ticket is what makes orchestration genuinely useful. A black-box approach to routing undermines the whole point.

Reporting across providers. If the platform consolidates transaction data from all your providers into one place, your operations team saves significant time. If it does not, you have added a new tool without solving the fragmentation problem.

Integration with fraud tools. Payment fraud management works better when it is connected to the routing layer rather than bolted on separately. Orchestration platforms that include fraud tooling, or integrate cleanly with specialist providers, give you more options.

Simplicity of setup. The best orchestration platforms are designed so that getting connected and configuring your first routing rules does not require months of work. If the onboarding process is complex enough to require significant internal resource, that cost should be factored into the comparison.

The Bigger Picture for Business Owners

The way payments are set up in a business reflects assumptions made early, often when the business was much smaller. A single payment provider made sense at the start. It usually does not make the same sense once a business is operating across multiple markets, processing meaningful volume, and competing in environments where checkout conversion rates matter.

The businesses that perform best on payment metrics tend to be the ones that treat the payment layer as something worth actively managing, not just a cost of doing business to be set up once and forgotten. That means understanding where transactions are failing, which providers are performing, and having the infrastructure to act on that information.

For UK startups and growing online businesses, the tools to do that are now much more accessible than they were a few years ago. The question is not really whether payment orchestration is worth it. It is whether the cost of not addressing it, in lost revenue, operational inefficiency, and slow market expansion, is worth accepting.

For most businesses that have hit the growth stage, it is not.

Tesla shares closed at $393.45 per share on Thursday to record its steepest single-day plunge since July last year. This came after a 12% rally in the stock price earlier in the holiday-shortened week.

Tesla on Thursday reported record second-quarter deliveries of 480,126 vehicles for the April–June period, up about 25% from a year earlier and well above analysts’ average estimate of 402,776 vehicles, according to Visible Alpha data cited by Reuters.

Tesla meanwhile produced 451,758 vehicles during the quarter. The deliveries exceeded production by more than 28,000 vehicles, driving the company to draw down inventory that it built up during the first quarter. A key driver of its strong business update was growth in Europe, while US sales appeared to be down.

Also read: Ferrari and BMW join Tesla, China in switch from copper to cheaper aluminium

The Elon Musk led company’s China-made EV sales have risen this year, buoyed by production of the refreshed Model Y, despite strong competition from BYD and domestic automakers. The company said it will report quarterly results on July 22 after markets close.

Why did Tesla shares fall after record Q2 update

Tesla shares had rallied 12% during the week till before Thursday amid strong expectations from the EV carmaker’s business update. Analysts and investors said optimism had already been priced in, which may have led to some profit booking after the business update.

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“The stock price is still riding a bit of a rollercoaster. Investors are hyped about the bounce-back, but the big money is still waiting to see if Tesla can actually deliver on Elon Musk’s promises around AI, robotaxis, and self-driving tech,” Reuters quoted David Wagner, head of equity at Tesla shareholder Aptus Capital Advisors, as saying.
Also read: Elon Musk-owned EV giant posts record second-quarter sales deliveries

Tesla launches 6-seater version of Model Y

Along with the business update, Tesla on Thursday launched the six-seater variant of its best-selling Model Y SUV in US, as it aims to boost sales of its electric vehicles after the removal of a key tax credit. According to its website, the price of the launch version of the car starts from $61,990.The EV maker said its Model Y with extended wheelbase is now also available in the United Arab Emirates, in a separate post on social media platform X.

Also read: Market Skepticism | Why Tesla’s best delivery quarter still triggered a sell-off

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

The changes come after representations from the Brokers’ Industry Standards Forum, which sought revisions to reflect current regulatory and market conditions. SEBI said the decision was taken to improve ease of doing business for brokers and ease of investing for clients.

Under the revised framework, for trades not covered under the margin trading facility, unpaid securities will be directly credited to the client’s demat account. After that, an auto-pledge will be created in favour of a separate account opened by the trading member, called the “client unpaid securities pledgee account,” or CUSPA. The pledge will carry the reason “unpaid” and will not need any specific instruction from the client.

The broker will also have to inform the client through email or SMS about the pending payment obligation and its right to sell the securities if the client does not pay. SEBI has asked trading members to frame a clear policy for handling such unpaid securities. This policy must explain the process, reasons, manner and timing for release or invocation of the pledge and liquidation of securities. The client must be given a maximum period of five trading days from the payout date to meet the payment obligation.

From WhatsApp chats to food orders: How Sebi cracked a Rs 144 crore stock manipulation scheme

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Sebi has also clarified that while such unpaid securities pledged to the broker’s CUSPA may be considered for reporting client margin collection to the clearing corporation, the broker cannot give fresh exposure to the client on the basis of these securities. This means the securities may support margin reporting, but cannot be used to allow additional trading limits.
The circular also lays down how excess pledged securities should be released. Brokers must check the value of pledged securities daily against the client’s ledger balance, margin obligation or other factors that may be specified by exchanges. If the pledged value is higher than what is allowed, the broker must release the excess securities by the next trading day.
If the client does not pay within the prescribed period, the broker may invoke the pledge and sell the unpaid securities after giving reasonable notice. The sale will be done in the market using the client’s unique client code. Any surplus funds left after settling the client’s obligation must be credited to the client’s ledger.
A key investor protection measure is the auto-release provision. If the pledge is neither invoked nor released within five trading days after payout, depositories will automatically release the pledge at the end of the sixth trading day. The securities will then become free balance in the client’s demat account, without any encumbrance.

Sebi has also barred brokers from further pledging or transferring CUSPA-pledged securities to banks or non-bank lenders to raise funds. In exceptional cases, such as lower circuit stocks with only sellers, trading suspension, halt due to surveillance or other valid reasons recognised by market infrastructure institutions, brokers may seek an extension of the pledge by up to one additional calendar week.

Stock exchanges have been asked to issue operational guidelines within 30 days. Most amended provisions will take effect three months from the date of those guidelines, while provisions on extension of pledge in exceptional cases will come into force six months from the circular date.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)