Clearing and Settlement

Settlement Agencies:•NSCCL: The NSCCL is responsible for post-trade activities of a stock exchange. Clearing and settlement of trades and risk management are its central functions.
•Clearing Members: They are responsible for settling their obligations as determined by the NSCCL.
•Custodians: Custodian is a clearing member but not a trading member. He settles trades assigned to him by trading members.
• Clearing Banks: Clearing banks are a key link between the clearing members and NSCCL for funds settlement.
•Depositories: The depository runs an electronic file to transfer the securities from accounts of the custodians/clearing member to that of NSCCL. As per the schedule of allocation of securities determined by the NSCCL, the depositories transfer the securities on the pay-out day from the account of the NSCCL to those of members/custodians.
•Professional Clearing Member: NSCCL admits special category of members namely, professional clearing members. Professional Clearing Member (PCM) may clear and settle trades executed for their clients (individuals, institutions etc.). A PCM has no trading rights but has only clearing rights, i.e. he just clears the trades of his associate trading members and institutional clients.

 

1.Trade details from Exchange to NSCCL (real-time and end of day trade file).
2.NSCCL notifies the consummated trade details to CMs/custodians who affirm back. Based on the affirmation, NSCCL applies multilateral netting and determines obligations.
3.Download of obligation and pay-in advice of funds/securities.
4.Instructions to clearing banks to make funds available by pay-in time.
5.Instructions to depositories to make securities available by pay-in-time.
6.Pay-in of securities (NSCCL advises depository to debit pool account of custodians/CMs and credit its account and depository does it).
7.Pay-in of funds (NSCCL advises Clearing Banks to debit account of custodians/CMs and credit its account and clearing bank does it).
8.Pay-out of securities (NSCCL advises depository to credit pool account of custodians/ CMs and debit its account and depository does it).
9.Pay-out of funds (NSCCL advises Clearing Banks to credit account of custodians/CMs and debit its account and clearing bank does it).
10.Depository informs custodians/CMs through DPs.
11.Clearing Banks inform custodians/CMs.

Rolling Settlement: Under rolling settlement, all trades executed on a trading day are settled X days later. This is called ‘T+X’ rolling settlement, where ‘T’ is the trade date and ‘X’ is the number of business days after trade date on which settlement takes place. The rolling settlement has started on T+2 basis in India, implying that the outstanding positions at the end of the day ‘T’ are compulsorily settled 2 days after the trade date.