Securities Analysis Portfolio Management

Assignment 2

Clearing and Settlement Procedure at

National Stock Exchange
By:
Shivangini
Roll no- 79
B-17

National Stock Exchange of India Limited (NSE)

The National Stock Exchange of India Limited (NSE) is the leading stock exchange of
India, located in Mumbai.
NSE was established in 1992 as the first demutualized electronic exchange in the
country.
NSE was the first exchange in the country to provide a modern, fully automated
screen-based electronic trading system which offered easy trading facility to the
investors spread across the length and breadth of the country.
NSE provides a trading platform for of all types of securities for investors under one
roof like:

 Equity
Corporate Debt
Central and State Government Securities
T-Bills
Commercial Paper (CPs)
Certificate of Deposits (CDs)
Warrants
Mutual Funds (MFs) units,
Exchange Traded Funds (ETFs),
Derivatives like Index Futures, Index Options, Stock Futures, Stock Options

NSCCL
NSCCL carries out the clearing and settlement of the trades
executed in the equities and derivatives segments of the NSE.
It operates a well-defined settlement cycle and there are no
deviations or deferments from this cycle.
It aggregates trades over a trading period, nets the positions
to determine the liabilities of members and ensures
movement of funds and securities to meet respective
liabilities.
NSCCL has empanelled 13 clearing banks to provide banking
services to trading members and has established connectivity
with both the depositories for electronic settlement of
securities.

 Read more about NSCCL's Clearing & Settlement

functions for:
Equities
Equity Derivatives
Currency Derivatives

Clearing Procedure at NSE

Clearing & Settlement NSCCL carries out the clearing and settlement
of the trades executed in the equities and derivatives segments of
the NSE.
It operates a well-defined settlement cycle and there are no
deviations or deferments from this cycle. It aggregates trades over a
trading period, nets the positions to determine the liabilities of
members and ensures movement of funds and securities to meet
respective liabilities.
NSCCL has empanelled 13 clearing banks to provide banking
services to trading members and has established connectivity with
both the depositories for electronic settlement of securities.
It also undertakes settlement of transactions on other stock
exchanges like, the Over the Counter Exchange of India.

Clearing & Settlement - Equities

NSCCL carries out clearing and settlement functions as per the
settlement cycles provided in the settlement schedule.
The clearing function of the clearing corporation is designed to
work out
a) what members are due to deliver and
b) what members are due to receive on the settlement date.
Settlement is a two way process which involves transfer of funds
and securities on the settlement date.
NSCCL has also devised mechanism to handle various exceptional
situations like security shortages, bad delivery, company
objections, auction settlement etc.
Clearing is the process of determination of obligations, after which
the obligations are discharged by settlement.

 NSCCL has two categories of clearing members: trading

clearing members and custodians. Trading members
can trade on a proprietary basis or trade for their
clients. All proprietary trades become the members
obligation for settlement. Where trading members trade
on behalf of their clients they could trade for normal
clients or for clients who would be settling through their
custodians. Trades which are for settlement by
Custodians are indicated with a Custodian Participant
(CP) code and the same is subject to confirmation by
the respective Custodian. The custodian is required to
confirm settlement of these trades on T + 1 day by the
cut-off time 1.00 p.m. Non-confirmation by custodian
devolves the trade obligation on the member who had
input the trade for the respective client.

 A multilateral netting procedure is adopted to determine

the net settlement obligations (delivery/receipt
positions) of the clearing members. Accordingly, a
clearing member would have either pay-in or pay-out
obligations for funds and securities separately. In the
case of securities in the Trade for Trade Surveillance
segment and auction trades, obligations are determined
on a gross basis i.e. every trade results into a
deliverable and receivable obligation of funds and
securities. Members pay-in and pay-out obligations for
funds and securities are determined by 2.30 p.m. on T +
1 day and are downloaded to them so that they can
settle their obligations on the settlement day (T+2).