A securities trade is not complete--or settled--until the security is delivered to the buyer and the

cash has been delivered to the seller. Although the transaction of the trade happens almost
instantly in electronic trading, the settlement process does not happen at the same time as the
trade.

What is Pay-i
n
a
nd
Pay-out?
y
P
ay-in day is the day when the securities sold are delivered to
theexchange by the sellers and funds for the securities
purchased aremade available to the exchange by the buyers.
y
P
ay-out day is the day the securities purchased are delivered to
thebuyers and the funds for the securities sold are given to the
sellers by the exchange.
y
At present the pay-in and pay-out happens on the 2nd working
day after the trade is executed on the stock exchange.


RISKS AT SETTLEMENT
Principal Risk: Growing risk of loosing securities or payments made to defaulting party before the
detection of default. Liquidity Risk: Increasing risk due to sellers of securities not receiving payments
when due or the buyers who do not receive delivery when it is due. Operational Risk: The risks resulting
from inefficiencies in information systems, management failures and human errors due to insufficient
capacity unable to meet the growing global securities trading. Trade floor - Risks for shareholder in
current system


Settlement-Settlement is a process of settling transactions in securities between buyers and
sellers by exchange of money and securities
Pay-in - When the securities sold are delivered to the exchange by the sellers and funds for the
securities purchased are made available to the exchange by the buyers.
Pay-out - When the securities purchased are delivered to the buyers and the funds for the
securities sold are given to the sellers by the exchange.
Custodian A financial institution that holds customers' securities for safekeeping so as to
minimize the risk of their theft or loss. A custodian holds securities and other assets in electronic
or physical form.
The most important asset of any Mutual Fund is its portfolio ( cash and investments ). It becomes
very important to ensure safety of the cash and investments. This responsibility of safe keeping
the securities lies with the custodian. Securities, which are in material form, are kept in safe
custody of a custodian and securities, which are in De-Materialized form, are kept with a
Depository participant, who acts on the advice of custodian.
Custodian performs a very important back office operation. They ensure that delivery has been
taken of the securities, which are bought, and that they are transferred in the name of the mutual
fund. They also ensure that funds are paid out when securities are bought. They keep the
investment account of the mutual fund. They collect and account for the dividends and interest
receivables on mutual fund investments. They also keep track of various corporate actions like
bonus issue, rights issue, and stock split; buy back offers, open offer etc and act on these as per
instructions of the Investment manager.
The Custodian normally charge portfolio fee, transaction fee and out-of pocket expenses in
accordance with the terms of the Custody Agreement and as per any modification made thereof
from time to time.
Custodian means a person who has been granted a certificate of registration to carry on the
business of custodian of securities under the Securities and Exchange Board of India (Custodian
of Securities) Regulations, 1996. The responsibilities of a sponsor includes :
(i) Provide post-trading and custodial services to the Mutual Fund;
(ii) Keep securities and other instruments belonging to the Scheme in safe custody;
(iii) Ensure smooth inflow/outflow of securities and such other instruments as and when
necessary, in the best interests of the unit holders;
(iv) Ensure that the benefits due to the holdings of the Mutual Fund are recovered; and
(v) Be responsible for loss of or damage to the securities due to negligence on its part or on the
part of its approved agents.