InvestorQ : Who is a clearing member and who is trading member in F&O?
F&O
Arya Nanda made post

Who is a clearing member and who is trading member in F&O?

Answer
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Archita Jajjoo answered.
2 years ago


A Clearing Member (CM) has the responsibility of clearing and settlement of all deals executed by Trading Members (TM) on NSE and BSE, who clear and settle such deals through them. Primarily, the CM performs the following functions:

Clearing: Computing obligations of all his TM's i.e. determining positions to settle

Settlement: Performing actual settlement. Only funds settlement is allowed at present in Index as well as Stock futures and options contracts

Risk Management: Setting position limits based on upfront deposits / margins for each TM and monitoring positions on a continuous basis.

Types of Clearing Members

Trading Member cum Clearing Member (TM-CM)

A Clearing Member who is also a TM. Such CMs may clear and settle their own proprietary trades, their clients' trades as well as trades of other TM's & Custodial Participants

Professional Clearing Member (PCM)

This is a case of a CM who is not a TM. Typically banks or custodians could become a PCM and clear and settle for TM's as well as of the Custodial Participants

Self Clearing Member (SCM)

A Clearing Member who is also a TM. Such CMs may clear and settle only their own proprietary trades and their clients' trades but cannot clear and settle trades of other TM's.

All clearing members (CM) must adhere to basic norms

They must have a net worth of at least Rs.300 lakhs. The net worth requirement for a CM who clears and settles only deals executed by self is Rs. 100 lakhs.

Deposit of Rs. 50 lakhs to NSE Clearing which forms part of the security deposit of the CM

Additional incremental deposits of Rs.10 lakhs to Clearing for each additional TM in case the CM undertakes to clear and settle deals for other TMs.