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  Clearing Mechanism

A Clearing Member's open position is arrived by aggregating the open position of all the Trading Members (TM) and all custodial participants clearing through him. A TM's open position in turn includes his proprietary open position and clients’ open positions.

  1. Proprietary / Clients’ Open Position
    While entering orders on the trading system, TMs are required to identify them as proprietary (if they are own trades) or client (if entered on behalf of clients) through 'Pro / Cli' indicator provided in the order entry screen. The proprietary positions are calculated on net basis (buy - sell) and client positions are calculated on gross of net positions of each client i.e., a buy trade is off-set by a sell trade and a sell trade is off-set by a buy trade.

  2. Open Position
    Open position for the proprietary positions are calculated separately from client position.
     
For example,
For a CM - XYZ, with TMs clearing through him - ABC and PQR

    Proprietary Position Client 1 Client 2 Net Member position
TM Security Buy contract Sell contract Net contract Buy contract Sell contract Net contract Buy contract Sell contract Net contract
ABC Interest Rate September contract 4 2 2 3 1 2 4 2 2 Long 6
PQR Interest Rate September contract 2 3 (1) 2 1 1 1 2 (1) Long 1 Short 2

XYZ’s open position for Interest Rate September contract is :

Member Long Position Short Position
ABC 6 0
PQR 1 2
Total for XYZ 7 2

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 / or securities separately as applicable based on the type of settlement applicable to specific contracts.


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