Personal Website of R.Kannan
Learning Circle - NSE Trading System
Clearing & Settlement - Securities Settlement

Home Table of Contents Feedback



To Main Page to View Table of Contents


Project Map

NSE Trading System - Clearing & Settlement (Part: II)

Clearing & Settlement (Equities) - Securities Settlement

The securities obligations of members are downloaded to members / custodians by NSCCL after the trading period is over. The members / custodians deliver the securities to the Clearing House on the pay-in day in case of physical settlement and make available the required securities in the pool accounts with the depository participants in case of dematerialised securities. Members are required to open accounts with depository participants of both the depositores, NSDL and CDSL.

Delivering members are required to deliver all documents to the Clearing House (in case of physical settlement) during its regular business hours from 10 a.m. to 5 p.m. but no later than 10:00 a.m on the pay-in day. Receiving members are allotted specific time slots on pay-out day to collect the documents from the Clearing House.

In case of dematerialised settlement, the delivering member should have clear balances of securities in his delivery account within his CM clearing account with the depository on or before 10:00 a.m. on the pay-in day. The depository would debit the delivering members account on or after 10:00 a.m. The depository would credit the receiving members' receipt account within his CM clearing account with the depository on or after 2:30 p.m. on the pay-out day.

Pursuant to SEBI directive (vide its circular SMDRP/Policy/Cir-05/2001 dated February 1, 2001) NSCCL has introduced a settlement system for direct delivery of securities to the investors accounts with effect from April 2, 2001.

Funds Settlement

NSCCL offers settlement of funds through 8 clearing banks namely Canara Bank, HDFC Bank, IndusInd Bank, ICICI Bank, UTI Bank, Bank of India, IDBI Bank and Standard Chartered Bank. Every Clearing Member is required to maintain and operate a clearing account with any one of the empanelled clearing banks at the designated clearing bank branches. The clearing account is to be used exclusively for clearing & settlement operations.

The member account may be debited for various types of transactions on a daily basis. The member is required to ensure that adequate funds are available in the clearing account towards all obligations, on the scheduled date and time. The member can refer to his various obligation statements and provide for funds accordingly. To ensure timely fulfillment of funds obligations, members may avail of the facility of standing instructions to transfer the requisite amount from some other account to the clearing account or a TOD facility from the bank. In case the member has availed such a facility, the member may furnish details of his obligation to the bank to ensure timely transfer of funds towards the same to avoid inconvenience.

The member with a funds pay-in obligation is required to have clear funds in his account on or before 11.00 a.m. on the scheduled pay-in day. The payout of funds is credited to the clearing account of the members on or after 2.30 p.m. on the scheduled payout day.

Funds Shortages

Members required to ensure that adequate funds are available in the clearing account towards all obligations, on the scheduled date and time. In all cases of funds shortages, NSCCL may initiate various actions including withdrawing the trading facility of the member, withholding the securities pay-out due to the member, reduction in permissible gross exposure limits, requiring the member to make advance pay-in, etc.

Once the member brings in the required funds to fulfill his shortage, the member may be permitted to trade with reduced exposure limits as per the slabs mentioned below:

Cumulative Funds
Shortage (Rs.)
Exposure Limit allowed
(% of current exposure limit)
2-5 lakhs 80%
Above 5 lakhs 60%

If the cumulative funds shortage for the next 10 settlements is less than Rs.2 lakhs, the exposure limits may be restored. The exposure limit may also be restored if a member provides a cash deposit equivalent to his cumulative funds shortage as the 'funds shortage collateral' in his clearing account. Such deposit will be kept with the NSCCL for a period of 4 settlements and will be released only if no further funds shortages are reported for the member in next 4 consecutive settlements. Further, a member shall not be provided any exposure benefit or any interest payment on the amount so deposited as 'funds shortage collateral'. The 'funds shortage collateral' may be deposited by way of cash, or FDR or Bank Guarantee.

Apart from the above, the member will be required to pay a penal charge at the rate of 0.09% per day computed on the amount outstanding at the end of the day, till the amount is recovered. Further, for every case of non-fulfillment of funds pay-in obligations, penalty points are levied on members.

Shortages Handling

On the securities pay-in day, NSCCL identifies short deliveries and the respective clearing member is debited by an amount equivalent to the securities not delivered by him and valued at a valuation price. This is called a valuation debit. A valuation debit is also conducted for bad delivery by clearing members.

NSCCL conducts a buying-in auction for security shortages on the day after the pay-out day through the NSE trading system. If the buy-in auction price is more than the valuation price, the member is required to make good the difference.

Shortages Handling - Valuation Prices

Valuation prices at which valuation debits are conducted are calculated as below:

  • Valuation Price for failure to deliver for Regular Market Deals, Depository Deals
    The valuation price for securities which were not delivered on the settlement day for securities, shall be the closing price of such securities, on the immediate trading day preceding the pay-in day for the securities unless prescribed otherwise from time to time by the relevant authority.

  • Valuation Price for failure to deliver for Limited Physical Market
    The valuation price for securities which were not delivered on the settlement day for securities, shall be the closing price of such securities, on the immediate trading day preceding the pay-in day for the securities unless prescribed otherwise from time to time by the relevant authority.

  • Valuation Price for Bad Delivery for Regular Market Deals
    The valuation price for securities which constitute bad deliveries, shall be the closing price of such securities, on the immediate trading day preceding the bad delivery rectification day for the securities unless prescribed otherwise from time to time by the relevant authority.

  • Valuation Price for Bad Delivery for Limited Physical Market
    The valuation price for securities which constitute bad deliveries, shall be the closing price of such securities, on the immediate trading day preceding the bad delivery rectification day for the securities unless prescribed otherwise from time to time by the relevant authority.

Shortages Handling - Close-out Procedures

All shortages not bought-in are deemed closed out at the highest price between the first day of the trading period till the day of squaring off or closing price on the auction day plus 20%, whichever is higher. This amount is credited to the receiving member's account on the auction pay-out day.

The prices at which shortages are closed-out are as below:

For Regular Market, Depository Deals

  • In the case of failure to give delivery : At the highest price prevailing in the NSE from the first day of the relevant trading period till the day of closing out or 20% above the official closing price on the auction day, whichever is higher.

  • In cases of securities having corporate actions and no 'no-delivery period' for the corporate action, all cases of short delivery of cum transactions which cannot be auctioned on cum basis or where the cum basis auction pay out is after the book closure / record date, would be compulsory closed out. For compulsory close out, the following formula shall be applicable:

    1. Higher of 10% above the closing price of the security in Normal Market on the auction day, or

    2. The highest traded price from first trading day of the settlement till the auction day.

  • In the case of non rectification/replacement for bad delivery : At the highest price prevailing in the NSE from the first day of the relevant trading period till the day of the closing out or 20% above the official closing price on the auction day, whichever is higher

  • In the case of non rectification/replacement for objection cases: At 20% above the official closing price on the auction day.

For Limited Physical Market Deals

  • In the case of failure to give delivery : At 20% over the actual trade price

  • In the case of non rectification/replacement for bad delivery: 20% over the actual trade price

  • In the case of non rectification/replacement for objection cases: At 20% above the official closing price in Regular Market on the auction day.

Auction Market

  • In the case of auction non delivery: When the auction seller fails to deliver in part or full on auction pay-in day, the deal will be squared up at the highest price prevailing in the NSE from the first day of the relevant trading period till the day of closing out or 20% over the official closing price on the close out day whichever is higher and will be charged to the auction seller unless otherwise specified.

  • In the case of an auction bad delivery: An auction delivery reported as bad delivery shall be squared up at the highest price prevailing in the NSE from the first day of the relevant trading period till the day of closing out or 10% over the official closing price on the close out day, whichever is higher and will be charged to the auction seller unless otherwise specified


- - - : ( NSE Trading System - Clearing & Settlement (Part: IV)
Securities Settlement -Shortages Handling
) : - - -

Previous                 Top                 Next

[ last updated on 15.10.2004 ]<>[ chkd-apvd-ef ]