Bonds Clearing &

Settlement process
NSE INDIA
The project in its present form describe how clearing and settlement works with
respect to India stock market and participants involves in this process and explain
how process works with the help of pictorial representation

Sriram
Goldenpi solutions
10-Jan-20
 Bonds Clearing & Settlement

NSE Clearing provides a facility for settlement of deals in corporate bonds.

Settlement of Corporate Bond Transactions
 All trades in corporate bonds available in demat form which are reported on any of the
following platforms provided viz., FIMMDA, NSE-WDM and NSE web site shall be eligible for
settlement through NSE Clearing.
 In order to facilitate settlement of corporate bond trades through NSE Clearing, both buy and
sell participants shall be required to explicitly express their intention to settle the corporate
bond trades through NSE Clearing.
 The trades will be settled at participant level on DVP I basis i.e., on gross basis for securities and
funds. The settlements shall be carried out through the bank and DP accounts specified by the
participants.
 On the settlement date, during the pay-in, participants shall be required to transfer the
securities to the Depository account specified by NSE Clearing and transfer the funds to the
bank account specified by NSE Clearing within the stipulated cut-off time.
 On successful completion of pay-in of both securities and funds, the securities / funds shall be
transferred by NSE Clearing to the depository / bank account of the counter-party.
Custodian Trades
 The participants desirous of clearing and settling the trade through a custodian may do so by
specifying the custodian details.
 Custodian may be specified either for a participant wherein all the trades for such participant
shall be eligible for settlement by custodian or for a trade wherein only that trade shall be
eligible for settlement by custodian.
 In order to facilitate settlement of trades identified for settlement by custodian, through NSE
Clearing, the custodian shall be required to explicitly express its intention to settle such trades
through NSE Clearing. The settlement of trade in such case shall take place through the
custodian’s bank and DP account as specified by the custodian.
Failure of Settlement Obligation of Corporate Bond Transactions
If either of the participants / custodians fails to honor their pay-in obligation, either fully or
partially, by stipulated time then the transaction shall be cancelled and shall not be considered
for settlement. Further the securities / funds received towards the pay-in obligation shall be
returned back to the respective participants / custodians.
Bonds Clearing & Settlement

1) OTC deal done over the phone or through broker

2) Reporting by Seller to BSE’s platform

2A) Reporting by Buyer to F-TRAC platform

3) Information flow regarding seller, buyer, bond & Consideration particulars from Exch. 1 to
Clg. Corp. 1

3A) instruction from clearing Corporation (Clg. Corp. 1) to Buyer to arrange funds to Clearing
Corporations Pooling A/c with RBI

4) Instruction from seller to Depository to transfer bonds to Pooling A/c of Clearing Corporation

4A) Funds Pay-in : RTGS transfer of funds from Buyer to Clearing Corporation pooling A/c at RBI

5) Bonds Pay-in by Sellers Depository to Clearing Corporation Pooling A/c

6) Bonds Pay-out form Clearing Corporation pooling A/c to Depository A/c of Buyer

6A) funds pay-out from Clearing Corporation’s Pooling A/c at RBI to Seller’s A/c at RBI through
RTGS

1. Settlement Securities (Bonds CP CD) settled in depositories

2. Existing demat account of participants
3. Funds settled through RBI RTGS account
4. Participants who have RBI RTGS account

 Buyers transfer funds to Settlement account

 Sellers receive funds from Settlement account

5. Participants who do not have RBI RTGS account

 Buyers avail their bankers facility to transfer funds to settlement account
 Sellers receive funds through bankers RTGS facility
Bonds Clearing & Settlement

DVP 1 Settlement (Normal)

Failed Trades (Funds not Received from Buyer) Bonds returned to Seller if Seller delivers
Bonds
Bonds Clearing & Settlement

Failed Trades (Bonds not received from seller) Funds returned to buyer if buyer transfers
funds