InvestorQ : Can you explain the settlement procedure on the NSE and the BSE in detail?
Ria Jain made post

Can you explain the settlement procedure on the NSE and the BSE in detail?

Answer
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Anu Biswas answered.
1 year ago


For Settlement of securities for NSE or BSE trades a CM has to open following accounts with any DP of CDSL / NSDL.

· CM Principal Account (Pay-in Account)

· CM Unified Settlement Account (Pay-out Account)

Pay-in

Procedure for Pay-in is as follows

· Arrange for transfer of securities from Client Account to CM Principal Account before the scheduled pay-in time

· Alternatively Pay-in can be done from client account directly through On Market Instruction

· If a CM has opted for Auto Pay-in the securities available in the CM Principal A/C would be considered for Pay-in. A member need not give any inter settlement/delivery out instruction

· If a CM has not opted for Auto Pay-in the securities have to be transferred from CM Principal A/c through On Market Instruction

· At the scheduled pay-in time the securities transferred through Auto Pay-in/On Market Instructions from CM Principal A/c/ On market Instruction from Client A/c would be earmarked for Pay-in.

Auto Pay-in

In order to avail Auto Pay-in facility a CM has to provide instruction to the CH in format specified by the CH. Members who have opted for Auto Pay-in need not give On Market Instructions from CM Principal A/c for any settlement or from CM clearing A/c for NSE.

Early Pay-in

The procedure for early pay-in is as follows.

· The BO and/or the CM who wishes to do early pay-in, shall fill in the Early Pay-in Instruction slip and deliver the same to his DP

· The securities for early pay-in can be delivered from the CM Principal a/c and the BO a/c only

· It is mandatory for CMs/BOs to mention settlement number in the Early Pay-in Instruction Slip. Thus through Early Pay-in Facility CMs can perform Settlement wise pay-in

· The BO or the CM can do early pay-in from the day of trading upto one day prior to the pay-in day

· As of now, the early-in facility is permitted for A/c Period/weekly and Rolling type of settlements only. In case the early pay-in facility is used for other type of settlements, the benefits of early pay-in will not be made available to the CM's. However the securities delivered to the designated early pay-in a/c will be picked up by the CH/CC for pay-in

· The securities already delivered as early pay-in would be first utilised for satisfying the net obligations of the CM and thereafter the pay-in of securities would be carried out.

Example of actual settlement at BSE

a) Net obligation of CM is 3000 shares.

b) Early pay-in is done for 1000 shares.

In this case, 1000 shares will be first utilised from the early pay-in a/c and the balance pay-in will have to be done as per the normal procedure based on the confirmation given by the BO's/CM's. The excess shares will returned to the CM USA a/c at the time of pay-out.

Let us look at another instance

a) Net obligation of CM is 3000 shares.

b) Early pay-in is done for 4000 shares.

In this case, all 4000 shares will be utilised from the early pay-in a/c alongwith the shares for which BO confirmation was given. The excess shares will returned to the CM USA a/c at the time of pay-out.

Pay-out

The Pay-out of a settlement would be received in the CM Unified Settlement Account on the day of pay-out. Members also have an option to obtain the pay-out of securities directly in the client account. As per the provisions of SEBI Circular Number SMDRP/Policy/Cir-05/2001 dated 1st February,2001 pay-out can be obtained in the client account by using the Pay-out Break up facility provided by the Exchange. If a CM has not provided any pay-out breakup, all such securities would be transferred to CM Unified Settlement Account.

Settlement of trades at NSE and other exchanges

For Settlement of securities for NSE/CSE/ASE & DSE trades a CM has to open following accounts per exchange with any DP of CDSL.

· CM Clearing Account

· The CM Clearing A/c would be used for pay-in and pay-out purpose.

Pay-in

Arrange for transfer of securities to CM Clearing Account before the scheduled pay-in time.

At the pay-in time the securities available in the CM Clearing Account would be considered for pay-in.

There is no need to provide any instruction from CM Clearing Account as the securities would be auto picked up for pay-in.

For auto pay in, CM clearing member account has to be mentioned for NSE.

Early Pay-in

The BO and/or the CM who wishes to do early pay-in, shall fill in the Early Pay-in Instruction slip and deliver the same to his DP.

The securities for early pay-in can be delivered from the CM Clearing a/c and the BO a/c only.

It is mandatory for CMs/BOs to mention settlement number in the Early Pay-in Instruction Slip. Thus through Early Pay-in Facility CMs can perform Settlement wise pay-in.

The BO or the CM can do early pay-in from the day of trading upto one day prior to the pay-in day.

As of now, the early-in facility is permitted for A/c Period/weekly and Rolling type of settlements only. In case the early pay-in facility is used for other type of settlements, the benefits of early pay-in will not be made available to the CM's. However the securities delivered to the designated early pay-in a/c will be picked up by the CH/CC for pay-in.

The securities already delivered as early pay-in would be first utilised for satisfying the net obligations of the CM and thereafter the pay-in of securities would be carried out.

Example of NSE settlement

a) Net obligation of CM is 3000 shares.

b) Early pay-in is done for 1000 shares.

c) CM Clg Member a/c has 3000 shares

In this case, 1000 shares will be first utilised from the early pay-in a/c and only 2000 shares will be picked up from CM Clearing a/c.

Take another illustration…

a) Net obligation of CM is 3000 shares.

b) Early pay-in is done for 4000 shares.

In this case 4000 shares will be first utilised from the early pay-in a/c and the excess 1000 shares will be returned to the CM in pay-out. The balance in the CM Clearing a/c, if any, will not be utilised for pay-in.

Pay-out

The Pay-out of a settlement would be received in the CM Clearing A/c on the day of pay-out. Members also have an option to obtain the pay-out of securities directly in the client account. As per the provisions of SEBI Circular Number SMDRP/Policy/Cir-05/2001 dated 1st February,2001 pay-out can be obtained in the client account by using the Pay-out Break up facility provided by the Exchange. If a CM has not provided any pay-out breakup, all such securities would be transferred to CM Clearing Account.