Clearing and Settlement
Clearing Corporation
A Clearing Corporation is a part of an exchange or a separate entity and performs three functions, namely it clears and settles all transactions, i.e. Completes the process of receiving and delivering shares/funds to the buyers and sellers in the market, provides financial guarantee for all transactions executed on the exchange and provides risk management functions. National Securities Clearing Corporation (NSCCL), a 100% subsidiary of NSE, performs the role of a Clearing Corporation for transactions executed on the NSE.
Rolling Settlement
Under rolling settlements all open positions at the end of the day mandatorily result in payment/delivery ‘n' days later. Currently trades in rolling settlement are settled on a T+2 basis where T is the trade day.
Example: A trade executed on Monday is mandatorily settled by Wednesday (considering two working days from the trade day). The funds and securities pay-in and pay-out are carried out on T+2 days.
Pay-in &Pay-out
Pay-in is the day when the securities sold are delivered to the exchange by the sellers and funds for the securities purchased are made available to the exchange by the buyers. Pay-out is the day the securities purchased are delivered to the buyers and the funds for the securities sold are given to the sellers by the exchange. At present the pay-in and pay-out happens on the 2nd working day after the trade is executed on the stock exchange.
Auction
On account of non-delivery of securities by the trading member on the pay-in Clay, the securities are put up on auction by the exchange. This ensures that the buying trading member receives the securities. The exchange purchases the requisite quantity in auction market and gives them to the buying trading member.
Recourses available to investor/client for redressing grievances
Complaints can be lodged with the Investor Grievance Cell (IGC) of the Exchange against brokers on certain trade disputes or non-receipt of payment/securities. IGC takes up complaints in respect of
- trades executed on the NSE, through a NSE trading member or SEBI registered sub broker of a NSE trading member, and
- trades pertaining to companies traded on NSE
Arbitration
Arbitration is an alternative dispute resolution mechanism provided by a stock exchange for resolving disputes between the trading members and their clients in respect of trades done on the exchange. If no amicable settlement could be reached through the normal grievance redressal mechanism of the stock exchange, then you can make application for reference to Arbitration under the bye-laws of the concerned Stock Exchange.
Investor Protection Fund
Investor Protection Fund (IPF) is maintained by NSE to make good investor claims, which may arise out of non- settlement of obligations by the trading member, who has been declared a defaulter, in respect of trades executed on the Exchange. The IPF is utilized to settle claims of such investors where the trading member through whom the investor has dealt has been declared a defaulter. Payments out of the IPF may include claims arising of non-payments/ non receipt of securities by the investor from the trading member who has been declared a defaulter. The maximum amount of claim payable from the IPF to the investor (where the trading member through whom the investor has dealt is declared a defaulter) is Rs. 10 lakhs.
