Settlement Cycle
The important settlement types are as follows:
- Normal segment (N)
- Trade for trade Surveillance (W)
- Retail Debt Market (D)
- Limited Physical market (O)
- Non cleared TT deals (Z)
- Auction normal (A)
Trades in the settlement type N, W, D and A are settled in dematerialized mode. Trades under settlement type O are settled in physical form. Trades under settlement type Z are settled directly between the members and may be settled either in physical or dematerialized mode.
Details of the two modes of settlement are as under:
Dematerialised settlement
NSE CLEARING follows a T+2 rolling settlement cycle. For all trades executed on the T day, NSE CLEARING determines the cumulative obligations of each member on the T+1 day and electronically transfers the data to Clearing Members (CMs). All trades concluded during a particular trading date are settled on a designated settlement day i.e. T+2 day. In case of short deliveries on the T+2 day in the normal segment, NSE CLEARING conducts a buy –in auction on the T+2 day itself and the settlement for the same is completed on the T+3 day, whereas in case of W segment there is a direct close out. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded. The settlement schedule for all the settlement types in the manner explained above is communicated to the market participants vide circular issued during the previous month.
Rolling Settlement
In a rolling settlement, for all trades executed on trading day .i.e.T day the obligations are determined on the T+1 day and settlement on T+2 basis i.e. on the 2nd working day. For arriving at the settlement day all intervening holidays, which include bank holidays, NSE holidays, Saturdays and Sundays are excluded. A tabular representation of the settlement cycle for rolling settlement is given below:
Activity | Day | |
---|---|---|
Trading | Rolling Settlement Trading | T |
Clearing | Custodial Confirmation | T+1 working days |
Delivery Generation | T+1 working days | |
Settlement | Securities and Funds pay in | T+2 working days |
Securities and Funds pay out | T+2 working days | |
Valuation Debit | T+2 working days | |
Post Settlement | Auction | T+2 working days |
Auction settlement | T+3 working days | |
Bad Delivery Reporting | T+4 working days | |
Rectified bad delivery pay-in and pay-out | T+6 working days | |
Re-bad delivery reporting and pickup | T+8 working days | |
Close out of re-bad delivery and funds pay-in & pay-out | T+9 working days |
Physical settlement
Limited physical Market : To provide an exit route for small investors holding physical shares in securities the Exchange has provided a facility for such trading in physical shares not exceeding 500 shares in the 'Limited Physical Market' (small window).
Salient features of Limited Physical Market
- Delivery of shares in street name and market delivery (clients holding physical shares purchased from the secondary market) is treated as bad delivery. The shares standing in the name of individuals/HUF only would constitute good delivery. The selling/delivering member must necessarily be the introducing member.
- Any delivery of shares which bears the last transfer date on or after the introduction of the security for trading in the LP market is construed as bad delivery.
- Any delivery in excess of 500 shares is marked as short and such deliveries are compulsorily closed-out.
- Shortages, if any, are compulsorily closed-out at 20% over the actual traded price. Non rectification/replacement for bad delivery is closed out at at 10% over the actual trade price. Non rectification/replacement for objection case is closed out at at 20% above the official closing price in regular Market on the auction day.
- The buyer must compulsorily send the securities for transfer and dematerialisation, latest within 3 months from the date of pay-out.
- Company objections arising out of such trading and settlement in this market are reported in the same manner as is currently being done for normal market segment. However securities would be accepted as valid company objection, only if the securities are lodged for transfer within 3 months from the date of pay-out.
Limited Physical Market
Settlement for trades is done on a trade-for-trade basis and delivery obligations arise out of each trade. The settlement cycle for this segment is same as for the rolling settlement viz:
Activity | Day | |
---|---|---|
Trading | Rolling Settlement Trading | T |
Clearing | Custodial Confirmation | T+1 working days |
Delivery Generation | T+1 working days | |
Settlement | Securities and Funds pay in | T+2 working days |
Securities and Funds pay out | T+2 working days | |
Post Settlement | Assigning of shortages for close out | T+2 working days |
Reporting and pick-up of bad delivery | T+4 working days | |
Close out of shortages | T+4 working days | |
Replacement of bad delivery | T+6 working days | |
Reporting of re-bad and pick-up | T+8 working days | |
Close out of re-bad delivery | T+9 working days |
Bad Deliveries (in case of physical settlement)
Bad deliveries (deliveries which are prima facie defective) are required to be reported to the clearing house within two days from the receipt of documents. The delivering member is required to rectify these within two days. Un-rectified bad deliveries are assigned to auction on the next day
Company Objections (in case of physical settlement)
The CM on whom company objection is lodged has an opportunity to withdraw the objection if the objection is not valid or the documents are incomplete (i.e. not as required under guideline No.100 or 109 of SEBI Good/Bad delivery guidelines), within 7 days of lodgement against him. If the CM is unable to rectify/replace defective documents on or before 21 days, NSE CLEARING conducts a buying-in auction for the non-rectified part of defective document on the next auction day through the trading system of NSE. All objections, which are not bought-in, are deemed closed out on the auction day at the closing price on the auction day plus 20%. This amount is credited to the receiving member's account on the auction pay-out day.